Disney will combine its Internet operations, which include ABCNews.com, ESPN.com and Disney Store, with Infoseek's search engine and functions such as e-mail.

Disney has created its own world: now cyberspace

The new combined operation will have the name go.com.

The company famous for its cartoon movies such as the Jungle Book aims to be positioned for the days when high quality videos can be broadcast via the Internet.

It estimates that go.com's intial revenues will be $350m per year, a figure it wants to see doubled by 2000.

"Clearly we see huge growth potential," said Steve Wadsworth, the president of Disney's Buena Vista Internet Group, which will be combined with Infoseek.

Despite that rapid growth in revenues Disney expects the new venture to operate at a loss initially "with profitability in the next few years".

Regarding the costs of the deal, Disney Chairman Michael Eisner, said: "We are investing in this for the future.

Micheal Eisner: investing for future

"If you believe that people are watching movies in the future not only on DVD (digital video disk) and VHS, but on the Internet, we have to be there.

"We think it is a good idea to have profits, but we understand you have to invest to get to that point.

"We want to position ourselves for the broadband world, and in the broadband world, content will reign," he said.

The companies did not disclose the value of the Disney assets being contributed to the deal.

Infoseek already has the go name on its site

Disney shares, which have slumped badly this year on lower earnings, edged up 25c to $27.87.5 in early trading on Monday. Infoseek's shares fell $4.50 to $47 on the Nasdaq Stock Market.

Disney took a 42% stake in Infoseek last year, working with it to create the Go Network, which is powered by Infoseek's search capabilities.

The site, which competes with Yahoo!, Excite and other major "portal" sites, offers Web searches, entertainment and personalized news.