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Tuesday, January 26, 1999 Published at 19:45 GMT

Business: The Company File

Compaq spins off AltaVista

AltaVista's Rod Schrock (left) and Compaq's Eckhard Pfeiffer

One of the Internet's most successful search-engines, AltaVista, will be floated as an independent company on the stockmarket by its new owner, computer manufacturer Compaq.

At the same time AltaVista announced an alliance with Microsoft, pairing it with Microsoft Network, a move that is a major setback for one-time Internet wunderkind, Inktomi.

The AltaVista search engine was invented by Digital to prove the quality of its servers. It soon became one of the most popular on the Internet. When Digital was bought by Compaq in June last year, AltaVista came as part of the package.

Compaq's President, Eckhard Pfeiffer, said the flotation would _unlock the tremendous value of AltaVista for our shareholders_.

Analysts believe a spin-off of AltaVista and related Internet properties could fetch $2bn to $3bn in a stock market hungry for Internet offerings. Earlier this month another search engine, Excite, was sold to a subsidiary of cable company TCI for nearly $7bn.

Rod Schrock, currently senior vice president of Compaq's consumer products group, will be AltaVista's first chief executive. He promised to turn AltaVista "into the most powerful and useful destination on the Internet".

Microsoft deal

Compaq has won a powerful ally for its Internet spin-off. Microsoft, the world's largest software company, will share "robust communication and community capabilities" between AltaVista and its own Microsoft Network.

Compaq said that AltaVista would offer its users an AltaVista-branded version of Microsoft's Hotmail service as well as future instant messaging technology developed by Microsoft.

Microsoft in turn will use AltaVista as main search engine for its Microsoft Network, replacing the search facility provided by Inktomi.

The deal is a serious setback for Inktomi. The company's shares fell by as much as 22% on the news.

David Peterschmidt, the company's chief executive, said: "While we are disappointed with events today, we hope that Inktomi and Microsoft will find new ways to work together across our product lines."

Last December AltaVista, was ranked as the twelfth most visited Web site in the United States, according to market research from Media Metrix. It is even more popular in the UK, ranking fifth in bi-weekly reach.

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Compaq press release on AltaVista spin-off

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