Yahoo! buying online dynamo to be acquired in $5.7 billion stock deal


April 02, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Yahoo! Inc. took another step yesterday to establish itself as one of the Internet's dominant companies, agreeing to buy online audio and video company Inc. in an all-stock deal initially valued at $5.7 billion.

Yahoo! is already the most widely used Internet navigation service. With 50 million users per month worldwide, it is the second-most-visited site in cyberspace, behind America Online.

However, Santa Clara, Calif.-based Yahoo! has refused to stand pat. In January, it struck a deal to buy personalized Web page company GeoCities Inc. for $3.6 billion. Now, with the purchase of, Yahoo! picks up the company that has moved more aggressively than any other to bring "streaming" sounds and images to an Internet world that, for all its phenomenal growth, still relies heavily on unvarying blocks of text, still photographs and simple, balky graphics.

"There's no reason not to believe that people are going to want a richer multimedia experience," said Chief Executive Officer and Vice Chairman Todd R. Wagner. "We believe that together we are going to drive that to a new level."

Wall Street greeted the purchase enthusiastically, propelling Yahoo! stock up $11.375 to close at $179.75 and shares up $11.8125, to $130.

Even before yesterday's surge, shares of Yahoo! had nearly quadrupled over the past eight months, while those of had grown more than four-fold.

"Strategically, this deal makes a lot of sense," said Dalton L. Chandler, an analyst with Needham & Co. Inc. in New York. "Every Internet site is trying to figure out ways to get people to stay at the site for longer periods of time."

Although loses money -- the company finished $16.4 million in the red last year -- it is seen as an up-and-comer that knows how to draw and keep an audience. The company is probably best known for its February broadcast of a Victoria's Secret fashion show that drew millions of online visitors.

Such a knack for garnering viewers -- or "eyeballs," as they are known in the industry -- is a huge turn-on to advertisers. With its purchases of GeoCities and, Yahoo! has tried to gather the biggest audience share possible in order to exert maximum price leverage on advertisers.

"We love leverage, and this deal is all about that, period," said Yahoo! President and Chief Operating Officer Jeff Mallet.

By joining forces with Yahoo!, also gains a larger, more global audience.

" has done well on its own, but to connect with this huge amount of traffic, that's the big payoff for them," said Daniel E. King of LaSalle St. Securities Inc. in Chicago. "It almost instantly gives them an international audience they're not reaching now."

The deal is subject to approval by federal regulators and shareholders.

Pub Date: 4/02/99

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