Compaq to Spin Off Alta Vista

Compaq Computer Corp., seeking to take advantage of the relatively high valuations that Wall Street has been awarding Internet companies, said it would spin off its Alta Vista subsidiary in a public offering.

No timetable was given for the spinoff, which is expected to include, an online vendor that Compaq recently agreed to acquire. Houston-based Compaq is expected to retain a stake in The Alta Vista Co., and Compaq said it would maintain its three-pronged Internet strategy of building the value of Alta Vista, supplying computers for Internet companies and selling computers directly via its own Web site,

Compaq president/CEO Eckhard Pfeiffer said that selling the Internet company to the public would “unlock Alta Vista's tremendous value” and allow it to seek alliances with other Internet service providers autonomously.

“Compaq is an Internet company, and it needs to maintain some Internet connections, but they don't need to own Alta Vista to do that,” said Cody Acree, a technology analyst at Southwest Securities, Dallas.

He declined to speculate what Alta Vista might be worth on the public market, but some published reports estimated that the Palo Alto, CA-based company could be valued at $2 billion or more.

Pfeiffer said he expected Alta Vista to generate ongoing revenues for Compaq, and said his company expects to improve its marketing efforts.

“Through Alta Vista and, Compaq will gain greater knowledge about our customers, enabling us to deliver information, services and products that are customized to these user needs,” he told analysts and reporters in a press conference.

Pfeiffer tapped Rod Schrock, a former senior vice president of the company's consumer products group, to be president/CEO of Alta Vista. Other Compaq executives were expected to join Schrock at Alta Vista, which will be based in Palo Alto.

Schrock said Alta Vista would have enough start-up capital from Compaq to operate for a full year without tapping into the funds generated by the public offering. He also said Alta Vista planned an aggressive promotional campaign to generate traffic to the site.

Compaq said the Alta Vista Web site already enjoys 20 million visits per month through its relationship with the computer maker, which offers one-key access to Alta Vista on its Presario line of personal computers. About 1.5 million of its Internet PCs have been sold since the product was developed, the company said.

In connection with the proposal to spin off Alta Vista, Compaq said it had reached an agreement with Microsoft for the two companies to exchange Internet services. Alta Vista will begin offering a branded Internet e-mail service powered by Microsoft's Hotmail technology, and Microsoft will use Alta Vista to power its search engine. The two companies also agreed to collaborate on future communications, messaging and community technologies.

Separately, Compaq reported fourth-quarter profits of $758 million, a 13.6-percent increase over profits of $667 million in the fourth quarter of a year ago. Diluted earnings per share were 43 cents for the more recent quarter vs. 42 cents in the year-ago quarter. Revenues during the quarter, which ended Dec. 31, were $10.86 billion, up 48.4 percent over revenues of $7.32 billion in the year-ago fourth quarter.

The company posted a loss for the year of $2.74 billion after several one-time restructuring and charges and other costs related to its acquisition of Digital Equipment Corp., through which it had acquired Alta Vista. In fiscal 1997, Compaq had posted profits of $1.86 billion.

Fiscal 1998 revenues were $31.17 billion, up 26.8 percent from revenues of $24.58 billion in fiscal 1997.

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