Filed at 11:29 a.m. EST
By The Associated Press
NEW YORK (AP) -- Yahoo! Inc. is buying GeoCities Inc. for
$4.58 billion in stock,
securing Yahoo!'s position among the dominant Internet
search and directory
services.
The deal announced today would give Yahoo! another
powerful brand name while
helping GeoCities reach more Web users. The addition of
GeoCities' Internet traffic
may make Yahoo! the No. 1 destination on the World Wide
Web, according to figures
from Media Metrix Inc., a research firm.
``We anticipate maintaining GeoCities as a stand-alone,
very, very strong brand.
There's a lot of brand equity in this company,'' said Tim
Koogle, chief executive officer
of Yahoo!
The race to capture visitors to the Web has created a
frenzied pace of consolidation
among Internet businesses. Internet companies are using
their high-flying stock prices
as currency to snap up competitors.
At Home Corp. agreed last week to buy Excite Inc., one of
Yahoo!'s biggest rivals, in a
deal valued at $6.7 billion in stock at the time of the
announcement.
Meanwhile, America Online Inc. is trying to build on its
position as the top Internet
access provider and Web destination. The Dulles, Va.-based
company agreed last fall
to buy Netscape Communications Corp. for about $4.2
billion.
Today's deal also puts pressure on Lycos Inc., the fourth
most visited Web site, to find
a partner in the fast-shrinking pool of independent search
and directory services,
known as portals.
Yahoo!'s 52 percent premium for GeoCities underscores the
stratospheric valuations
of these tiny companies, most of which didn't exist a few
years ago.
GeoCities, which hosts Web pages created by individuals,
has slightly more than 290
employees. Last quarter, the Santa Monica, Calif.-based
company lost $8.4 million, or
27 cents a share, on sales of $7.5 million, according to
its fourth-quarter 1998 financial
results also released today.
Yahoo!, a comprehensive Web site offering everything from
news to free e-mail, has
about 800 employees and earned $18.5 million on sales of
$76.4 million in the latest
quarter.
The two companies have worked together over the past year
by offering each other's
services to their customers. Yahoo!, based in Santa Clara,
Calif., says it will save money
on technology costs by using GeoCities' computers to help
handle the massive traffic
on its Web sites, including transactions such as online
purchases.
Yahoo! plans to place ads on GeoCities' site to try to
lure its visitors to Yahoo!'s already
popular Web destination.
``We're going to use the power of our distribution and the
power of the Yahoo! brand
and marketing'' to expand the combined entity, Koogle
said.
Under the terms of the deal announced today, Yahoo will
exchange about 10.6 million
shares of its stock for the 31.4 million shares of
GeoCities common stock. In addition,
Yahoo will convert about 8.9 million GeoCities stock
options into about 3 million
Yahoo stock options.
Shares of GeoCities jumped on the opening of the Nasdaq
Stock Market this morning,
rising 45 percent, or $33.56 1/4 to $108.56 1/4 in heavy
trading. Yahoo!'s stock rose
$5.12 1/2 to $341, increasing the value of the deal.
The deal is expected to close in the second quarter.
--Rohit Khare -- UC Irvine -- 4K Associates -- +1-(626) 806-7574 http://www.ics.uci.edu/~rohit -- http://xent.ics.uci.edu/~FoRK