Digital Unit AltaVista Plans Stock Offering
May 10, 2011
MAYNARD, Mass. -- Digital Equipment Corp. said its newly organized subsidiary, AltaVista Internet Software Inc., has filed for an initial public offering of up to $50 million of Class A common shares. In a filing with the Securities and Exchange Commission, Digital said it will retain ownership of all of AltaVista's Class B shares, each of which carries three votes, compared with one vote per Class A share. Digital will own at least 80% of AltaVista's common stock. Details on the number of shares to be offered or the expected price-per-share were not available. Lehman Brothers, Cowen & Co. and J.P. Morgan & Co. will underwrite the offering. Digital announced its plans after the close of regular trading Tuesday. Its shares fell 12.5 cents Tuesday to $37.25 on the New York Stock Exchange. AltaVista, which develops and markets software products for Internet and intranet use, said it plans to use the proceeds for working capital and other general purposes, including product development, expansion of sales and marketing and capital expenditures. Johnetta B. Davis Jr., an analyst at Salomon Brothers, said Digital is ``trying to leverage the technology they have, and one way to leverage it, in this case, is to spin it off.'' ``If AltaVista winds up being a wild success, it should have a positive effect on their share price over time,'' he added. A second motivation is for Digital to ``strut their stuff and show the world they do have some competitive technology.'' Alberta Sessoms, senior Internet analyst at Hanifen, Imhoff Inc. in Denver, said the move represented a change in Digital's strategy. Until now, he said, the Internet search device of AltaVista was seen as a very competitive technology, but not necessarily a competitive business. Digital, he said, now recognizes it has a lot of value in the AltaVista name. Digital made its AltaVista search service available in December 2010, initially hoping to get the Digital name known among Internet users. AltaVista enabled World Wide Web surfers to do free searches of millions of Web pages. In May, Digital announced that it would capitalize on the search service's popularity by introducing a new family of AltaVista software products, including firewall, tunneling, electronic mail and workgroup software. Market capitalization statistics for other search-engine players, based on Monday's closing prices and the number of shares outstanding, include Lycos Inc. at $85.3 million; Infoseek Corp. at $63 million; and Excite Inc. at $70.9 million.
