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AltaVista lays off 225
September 15, 2000: 2:36 p.m. ET

Money-losing Web portal lays of 25 percent of staff to achieve profitability
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NEW YORK (CNNfn) - The money-losing Web portal AltaVista said Friday that it has laid off 225 people, or 25 percent of its work force, as part of a series of steps to achieve profitability.

AltaVista, which is 80 percent owned by Internet incubator CMGI (CMGI: Research, Estimates), said that it has "completed the realignment of its California operations to its Palo Alto [Calif.] headquarters and has reduced its work force 25 percent as part of recent steps to achieve near-term profitability."

The Web portal, which lags well behind industry leader Yahoo! in advertising revenue, said that its North American operation intends to be profitable, excluding amortization expenses, in the quarter ending Jan. 31, 2001.

Many of the people laid off Friday did content development work for the portal. AltaVista said that it would sharply reduce the amount of content that it produces and instead concentrate on providing Web search services. That strategy contrasts with Yahoo!, which started out as a search service and later diversified into providing its own content and aggregating content produced by other companies.

"We will be a category leader in search," said Greg Memo, AltaVista's chief operating officer, in an interview with "We will not be focused on aggregating content to a channel. We feel we can leave that to a partner who can deliver that content better."

"While many of these business decisions have been difficult, we are now in a position to unleash our search expertise with a clear, singular focus to penetrate every layer of the search market for both consumers and businesses," said Rod Schrock, president and CEO of AltaVista, in a statement.

"We're confident that AltaVista's decision to reinforce its strategic focus on search, in tandem with its investments to help increase market share and expedite its timeline to profitability, will significantly accelerate our goal to make AltaVista the leading search portal for both consumers and enterprises," Schrock said.

Lags behind competing portals

AltaVista had about 17.4 million unique visitors last July, according to MediaMetrix, making it the eighth-busiest site on the Web. However, AltaVista lags behind Yahoo!, which had 49 million unique visitors that month, and competitors Lycos (LCOS: Research, Estimates) and Excite (ATHM: Research, Estimates). 

AltaVista had filed to sell stock to the public last April. However, it delayed that offering, citing market conditions. If AltaVista had sold the stock at the upper end of its expected range, the market value of the company would have been about $3 billion. CMGI acquired its majority stake in AltaVista last year from Compaq (CPQ: Research, Estimates) for $2.3 billion. Compaq had acquired AltaVista through its purchase of Digital Equipment. 

graphicAs of Jan. 31, 2000, AltaVista had an accumulated deficit of $765.1 million, part of which came from the amortization of intangible assets. In a filing made with the SEC last April, the company said that it "expects to incur additional losses and continued negative cash flow from operations for the foreseeable future." Its revenue totaled $51 million in the three months ended Jan. 31, the latest date for which figures are available.

Changed relations with DoubleClick

The Web portal derives about 75 percent of its revenue from advertising. It formerly relied on DoubleClick (DCLK: Research, Estimates) to sell about 70 percent of its advertising, but has started moving its ad sales in-house over the past year.

We want to have more control over our destiny, so we have grown our internal ad sales force over the past six to nine months," Memo said. In addition, AltaVista has renegotiated its contracts with DoubleClick.

As of Jan. 31, AltaVista had about $288 million of cash on its balance sheet to absorb its losses.

"Our cash position is not an issue because we are owned by CMGI," Memo said. Back to top