Infoseek Tries to Stay Alive in Portal Race
Sunnyvale--Infoseek Corp., the No. 4 Internet search service, last year vowed to crush Yahoo Inc. and Excite Inc. after teaming up with giant Walt Disney Co. to create a new Web venture, the Go Network.
Now it appears that the Disney alliance has crushed Infoseek instead. Infoseek has lost some top executives, its stock price has fallen 45% from its high in March, its Infoseek search engine is relegated to secondary name-brand status, and it’s incurred bigger losses to fund the marketing campaign for the Go Network.
After this week’s announcement that Disney is negotiating to buy the 57% of Infoseek that it doesn’t already own, Infoseek may get another chance.
“Right now, the portal race is close to being over,” said Chris Charron, an analyst at Forrester Research Inc.in Cambridge, Mass. Infoseek’s “progress to date has been mixed.”
Disney said it was in talks with Infoseek to acquire the balance of the company and may combine it with its own online properties, such as Disney.com, Disney Blast and ABC.com. Disney said it might pay for the purchase with a new class of stock that would track the combined performance of Infoseek and Disney’s Internet operations.
The combination would solve problems for both Disney and Infoseek. It would allow Disney to package all of its online properties in one place, run by one management. It would let Disney keep its entertainment assets together, including its theme parks, movie studio and retail stores. And it might boost the company’s stock.
Disney’s lagging share price is definitely “one of the reasons they are doing this,” said Jessica Reif Cohen, an analyst at Merrill Lynch & Co. who has a near-term “neutral” on the stock. “It makes sense from Disney’s point of view to control all of Infoseek.”
A combination also would give Infoseek new revenue streams from Disney’s other online holdings.
“Infoseek is a great service, but it doesn’t capitalize on the Disney brand,” said Rich MacDonald, a J.P. Morgan & Co. analyst who has a “buy” rating on Disney shares.
For example, Infoseek gets no revenue from the Disney Blast children’s service, Disney.com, Disney Store or other units.
Infoseek receives revenue from a handful of Web sites in the Go Network. It also generates revenue with banner advertising, electronic commerce and licensing from MrShowbiz.com, ABCNews.com, ESPN.com and related sites.
“Where they’ve fallen short of expectations is the monetization of that traffic” from the Go Network, said Andrea Williams, an analyst at Volpe Brown Whelan & Co. who rates Infoseek “neutral.”
The company reported a loss of $56.9 million, or 93 cents a share, on revenue of $29.6 million for the period ended April 3.
In contrast, Yahoo’s first-quarter sales nearly tripled to $203.3 million in 1998 from a year earlier.
“They have grown in traffic, but they’re clearly not able to catch a Yahoo or AOL,” Charron said.
