Yahoo on acquisition spree for survival

Daniel Sorid and Reshma Kapadia

NEW YORK: Since its inception in 1994 as "Jerry's Guide to the World

Wide Web," Yahoo has made a name for itself, and attracted millions of

Internet users all over the world, with a massive list of categorized Web sites

and free services.

But after scooping up much of the available traffic on the Web using that

strategy, it is struggling to make money. Now, with more than $1 billion in

cash, it's launched an aggressive strategy to acquire surviving dot-coms at

bargain prices in businesses from job postings to music.

The Internet media giant is reinventing itself into a diversified business

whose fortune is tied less to advertising, signing several deals in two months,

and muscling its way through the Internet sector in search of more

opportunities. Indeed, the company has grown so quickly that some worry it might

run into problems. They say Yahoo now faces the challenge of converting the new

partnerships and acquisitions into profits.

"They have their plate relatively full," CIBC Internet analyst John

Corcoran said. "I think it's fair to state they have a lot of execution

risk right now." In its latest move -- it snatched up HotJobs.com Inc. away

from its original suitor TMP Worldwide Inc. with a $436 million offer approved

Thursday -- Yahoo is showing that it will flex its wide-ranging assets and cash

to grasp onto Web businesses it believes can thrive in the post-meltdown

Internet era.

In two months, Yahoo has linked up with US No. 2 local telephone company SBC

Communications Inc. in a joint venture in high-speed Internet access, and

Internet search engine company Overture Services Inc. to include paid

advertisers in its search results.

Yahoo also has picked up Launch Media Inc., which has led to a new Yahoo

music site that will help it compete with AOL Time Warner Inc. and Microsoft

Corp. in the increasingly hot online music business.

Opening up the door to partnerships or mergers with other companies that want

to maintain their own brand names, Yahoo did not impose its own name on Launch

as it did after its acquisition of GeoCities, an online communities service, and

Broadcast.com, which streams audio and video over the Web.

Yahoo is also participating in the fee-based digital music offering

Pressplay, which is jointly owned by Vivendi's Universal Music Group and Sony

Music Entertainment.

The moves are all part of Chief Executive Terry Semel's plan laid out at a

November analysts' meeting, which called for an equal balance of revenues from

advertising and services.

From 'Jerry's guide' to global presence



In its earlier days, Yahoo was all about traffic and stickiness, adding a host
of free services, including online yellow pages, news, e-mail and chats.

Founded by Stanford University Ph.D students David Filo and Jerry Yang, Yahoo

ripped through corporate conventions with a young management team that took the

company public in 1996. Showing their contempt for traditional business, the

founders have given the definition of a "yahoo" as "rude,

unsophisticated" and "uncouth", according to Yahoo's Web site.

With the bursting of the dot-com bubble and the onset of the worst

advertising slump in recent history, Yahoo's popularity could no longer

guarantee continued and growing profits. On a split-adjusted basis, the stock

fell from as high as $250 to as low as $25 over last year.

A weakened ad market led Yahoo to alter its strategy from a be-all free

online services company to one that survives on a combination of ads and paid

services.

"I represent a company that's basically a free company supported by

advertising," Greg Coleman, Yahoo's executive vice president of North

American operations, said at an ad industry conference earlier this month.

"We are trying to get more money from premium operations."

As it seeks new partners, Yahoo brings with it a massive following with sites

in a dozen languages and cash holdings that, as of September 30, reached $1.7

billion. Henry Blodget, the outgoing Internet analyst at Merrill Lynch, said

Yahoo may now go after the real estate listings business by picking up

Homestore.com Inc., which has been bleeding money, along with smaller dot-com

companies.

Blodget -- one of the biggest cheerleaders of the Internet sector during the

dot-com boom -- said Yahoo and the dot-com companies overall could start to see

renewed growth following a brutal phase that saw the demise of many Internet

companies.

"Darwin did his thing, and now the industry can move on to a more mature

phase," Blodget said. "Growth from here, at Yahoo and other companies,

will likely be more gradual but steady for the next several years."

Acquisition target, as well



Yahoo has also been seen as a potential acquisition target for other media and
technology companies including the likes of Walt Disney Co., Microsoft Corp.,

Terra Lycos and USA Interactive.

The appointment of former Hollywood studio executive Terry Semel to head up

Yahoo earlier this year has only sparked more speculation that he may be

preparing the Internet media giant for a partnership with a media company.

Some industry consultants have suggested that Yahoo may sell off pieces of

its business to interested parties. Barry Diller, trying to build his

interactive commerce platform at USA Interactive, may be a possible partner to

Yahoo, or one of its rivals.

Diller may focus on local services, expanding on his CitySearch and

Ticketmaster assets, analysts said. Yahoo, with its win over TMP Worldwide to

buy HotJobs.com, will also look to build that area -- one that many, including

large newspapers, have characterized as a strong growth opportunity.

(C) Reuters Limited.