Yahoo Agrees to Buy Inktomi

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Yahoo Inc. yesterday announced its intention to buy Internet search software company Inktomi Corp. for $235 million.


The deal is aimed at strengthening Yahoo's presence in the $1.4 billion pay-for-performance online search business, the fastest-growing online advertising medium. It comes 10 days after paid-search market leader Google Inc. expanded with Froogle, a new online shopping service for products.


Inktomi, Foster City, CA, offers algorithmic search technology and paid inclusion services to clients that include Amazon.com, MSN, Walmart.com, Overture, eBay.com and Lycos/HotBot.


Under the terms, Yahoo, Sunnyvale, CA, is expected to acquire Inktomi for $1.65 per outstanding share in cash. It will also assume some debt.


The deal is expected to close in the first quarter after approval from Inktomi's shareholders and regulatory authorities.


Inktomi reported a net loss of $41.5 million on revenue of $112.7 million for the 2002 fiscal year ended September. A fifth of its staff was laid off in October. And last month it sold its enterprise search software business for $25 million, focusing on online search.


Inktomi's acquisition is yet another step by Yahoo to beef up its search business since October.


The company recently combined Yahoo Directory and third-party algorithmic search results and expanded its repertoire of most-searched terms. More money has been invested in building the Yahoo Search brand and features like weather, news and stock data have been added to search results pages.


Also, it launched a new version of Yahoo Companion, an integrated search toolbar that allows consumers to access their personalized browser settings wherever Internet access is offered.


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