Compaq Bulks Up for the Portal War Ahead

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With predictable myopia, the cable industry is dwelling on
USA Networks' absorption of Lycos.

As if that were the only big search-engine/portal deal
going on these days!

Unquestionably, the Lycos deal -- if consummated -- is
immensely significant, largely because of the transaction opportunities that it creates.

But dealmaking is running rampant through the online portal
world these days, and other dealmakers are looking toward the broadband arena as the
playground.

The veteran -- albeit scarred -- AltaVista search engine is
an excellent example of what's going on. AltaVista was one of the first Web search
engines, but it is now positioned largely as a business-oriented tool, long ago eclipsed
by Yahoo, Excite and, maybe, Lycos.

Many business customers -- and also a vast and loyal cadre
of consumers -- insist that AltaVista is the most fair and thorough search engine that
they can use. Originally developed by Digital Equipment Corp., AltaVista was part of the
package when Compaq acquired DEC.

Compaq -- hardly a disinterested player when it comes to
the broadband world -- is trying to spin off part of AltaVista; an IPO is due later this
year. At the same time, AltaVista is bulking up to fight for its role in the looming
portal war.

A couple of weeks ago, AltaVista acquired Zip2 Corp., which
licenses yellow-pages and content-management software to local newspapers for use in their
Web businesses. Compaq paid $200 million in cash for Zip2 just one month after it had paid
an almost identical sum to acquire Shopping.com, an online retail center.

This has all of the makings of a portal play: Zip2 has
about 150 local allies nationwide, including papers owned by its initial media investors
such as Knight Ridder, Hearst, Belo and The New York Times Co. The expectation is that
these newspapers and other partners will incorporate AltaVista search technology and
Shopping.com retail features into their services.

For its part, Compaq continues to build its cagey
relationships throughout the high-speed access business, assuring a presence through the
distribution and end-user route. Compaq's stake in Road Runner could become a wedge
to push the AltaVista/Zip2/Shopping.com (and anything else?) portal into the broadband
arena.

Conversely, Zip2's alliances might become a
steppingstone to help Road Runner find additional alliances -- especially in markets that
would otherwise be good pickings for the independent high-speed-access providers.

Compaq also has relationships with regional Bell operating
companies, in connection with their digital subscriber line services, and with
Hughes' DirecPC. Telco deals for AltaVista/Zip2 would be dicey because of the phone
companies' own yellow-pages initiatives. On the other hand, none of the Bell online
yellow-pages/directory ventures has amounted to anything, so maybe the Zip2 portal might
be of help.

Talk about co-opetition.

Moreover, Compaq's hardware "triple-play"
agenda (as it dubs the cable/telco/satellite high-speed-access capabilities) adds
importance to the computer-maker's growing content presence. It also underscores the
growing expectations for broad portals as the key to interactive transactions.

Compaq's advantage in all of this may come from the
direct Internet-connection button that is showing up on the keyboards of its best-selling
desktop and laptop "Presario" computers. It enables instant access to a central
site, such as a multipurpose portal.

That has been the one-button dream of interactive
visionaries for years. In Compaq's version, the button drives millions of users to a
Compaq-controlled portal. By some measures, the keyboard button is already accounting for
3 percent to 5 percent of accesses. That could give Compaq even greater leverage with its
carrier partners and with portal advertisers.

On other horizons, Compaq reinforced its Internet
commitment during the past month, especially in the e-commerce sector. The company
unveiled "next-generation" network-consulting and integration services for
Internet-access and network providers, as well as individual business customers.

Compaq also plans to offer videoconferencing, voice-over-IP
networks and unified messaging servers as part of its service-bureau approach to the
Internet. Some of those are areas where the company could find itself face-to-face with
its business clients or system-integrator customers.

That's the sign of a serious player.

The portal wars are under way, as other recent alliances
have shown. Media ventures -- notably Disney's "Go" portal (encompassing
Infoseek) and NBC's Snap, not to mention the AOL-TV initiative -- are reminders that
the USA/Lycos deal, while impressive, faces savvy and well-positioned competitors.

And don't forget Yahoo!

I-Way Patrol columnist Gary Arlen covets one-button
high-speed access.

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