AltaVista Company

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AltaVista Company

1070 Arastradero Road
Palo Alto, California 94304
U.S.A.
Telephone: (650) 320-7700
Fax: (650) 320-7720
Web site:http://www.altavista.com

Private Company
Incorporated: 1995
Employees: 635
Sales: $73.6 million (1999)
NAIC: 514191 On-Line Information Services

Billing itself as “the premier knowledge resource on the Internet,” AltaVista Company is responsible for creating the first full-text, searchable database of the World Wide Web. The company’s eponymous search technology may be likened to a vast road map that spans the entire Internet, providing users with immediate access to what many consider the richest, most relevant information in electronic format, from web pages and shopping to up-to-the-minute news, live audio and video, and countless other resources. AltaVista is majority-owned by CMGI, Inc. and headquartered in Palo Alto, California. The company also has offices in San Mateo and Irvine, California, as well as Chicago, New York, and London.

Progenitor: Digital Equipment Corporation (1957-95)

AltaVista Company is the progeny of Digital Equipment Corporation (DEC). Founded in 1957 by MIT engineers Kenneth Olsen and Harlan Anderson, DEC created the first interactive computer, called the PDP-1, in 1960. Three years later, the fifth-generation version, the PDP-5, was released and given the moniker “the minicomputer.” DEC’s revenues and profits grew an average of 30 percent annually for the next 20 years.

In 1974, the company entered the computer network arena when it introduced digital network architecture (DNA) in order to connect its computers to local area networks (LANs) and wide-area networks (WANs), creating DECnet Phase I. This was followed by DEC engineer Gordon Bell’s creation of a line of computers more powerful than the PDPs. Known as VAX, the first one, called the VAX-11/780, was released in 1977. Two years later, Olsen committed billions of dollars to expand the VAX computer line utilizing entirely DEC-manufactured components. Focusing on the large commercial market, products such as the VAX 6000 mini, released in 1984, as well as an extended DECnet, helped the company’s sales and earnings soar in the mid-1980s.

But in the 1990s, the company suffered. Slow both in realizing the increasing importance of UNIX and in joining the open personal computer market, DEC reported its first-ever quarterly loss in 1990 and a net fiscal loss for 1991. Olsen stepped down from his post by 1992, replaced by Robert Palmer, who instituted a massive restructuring. More than 60,000 employees were laid off and numerous manufacturing plants were shut down in an effort to resuscitate the failing giant.

With Palmer at the helm, the company began a quick turnaround. Japanese giant Mitsubishi agreed to manufacture DEC’s Alpha chip in 1993; DEC sold its RDB database software operations to Oracle in 1994; and DEC and Raytheon together created a multimillion-dollar joint venture to upgrade the onboard computers for the U.S. Navy’s E-2C Hawkeye aircraft.

Then, in 1995, the company developed the AltaVista Internet search engine, “which was designed to index every word on the Web.” The search engine was released in December of that year and a subsidiary company was created to operate this promising new business.

Stacking the DEC in 1995: Web Indexing and Searching With AltaVista

According to AltaVista’s web site, “Big ideas, excellent equipment, and a fascination with keeping track of information” were all part of the reason for AltaVista’s creation at DEC’s Research lab in Palo Alto. “During the spring of 1995, three DEC scientists were discussing Digital’s new Alpha 8400 computers over lunch. These computers held the promise to run existing database software up to 100 times faster than any competing hardware. In the midst of this conversation, our researchers devised an idea to store every word of every page on the entire Internet in a searchable index, then leverage the Alpha 8400 to create a fast, objective way to extract relevant information from this massive body of knowledge.”

The name AltaVista came from employees who had been viewing a partially erased lab board. “The word ‘Alto’ (of Palo Alto) was juxtaposed beside the word ‘vista’ and someone called out, ‘How about Alto Vista!’ ” This led to the slightly modified appellation AltaVista, or “the view from above.” In December 1995, the first searchable full-text database of the World Wide Web, now called AltaVista, was released. The following year, DEC toyed with the idea of taking AltaVista public either as a partially owned subsidiary or as a complete spinoff, but decided instead to retain full ownership.

In February 1997, AltaVista provided the first multilingual search capability on the Internet. A year later, the company’s web site achieved record traffic and substantial ad revenue growth. Later that year, in May, the company provided the first-ever, single web search tool for Chinese, Japanese, and Korean users.

Hit the DEC: The Demise of a Giant, 1997-98

Unfortunately for DEC, the creation of AltaVista was not enough to save itself, and it seemed to be a classic case of too little, too late. In 1997, DEC sold its printing systems business to Virginia-based Genicom. Also that year, Digital sued Intel, accusing the latter of utilizing patented technology governing branch management (used to speed up a computer chip) to develop the Pentium microprocessor. Intel, of course, coun-tersued, accusing DEC of violating 14 Intel patents. To settle the litigation, DEC sold its semiconductor production operations to Intel in 1998, and the $625 million deal received approval from the Federal Trade Commission with the condition that DEC make its Alpha technology available to such Intel rivals as Advanced Micro Devices (AMD) and International Business Machines (IBM).

It was the death-knell for the 41-year-old computer giant. In June 1998, Compaq Computer Corporation paid approximately $9 billion to acquire DEC. Palmer stepped down and the company was completely absorbed into Compaq. Digital Equipment Corporation, a world leader in implementing and supporting networked business solutions, was gone.

Compaq acquired DEC in order to improve its customer services battle against Dell. Immediately, the company chose AltaVista as the primary default search engine for the Compaq Presario line of desktop PCs and began altering AltaVista to make it more user-friendly. By January 1999, AltaVista Company was restructured as a wholly owned subsidiary of Compaq, and Rod Schrock was named the president and CEO of the new entity, serving in that position until October 2000.

Over the next six months—while Compaq acquired Shopping.com, a leading online retailer of products and services, and Zip2, the leading provider of Internet platform solutions for media companies and local e-commerce merchants, both of which were integrated into AltaVista—AltaVista launched AltaVista.de, its German site. AltaVista also set a new strategy in motion with the introduction of robust services for web-savvy users, such as Enhanced AltaVista Search (offering the Internet’s first web index freshness guarantee and new multimedia search capabilities); the AltaVista Microportal (the world’s first microportal, a personalized desktop window to premier AltaVista services); and Shopping.com (adding seven superstores within the first Ultrastore concept, which carried with it the Internet’s first 125 percent satisfaction guarantee).

Compaq, like DEC, considered taking AltaVista public in early 1999 in order to compete with such rivals as Yahoo! and Lycos, but decided against it. Instead, in August 1999, CMGI, Inc.—a leading Internet incubator representing a network of 70 established and emerging companies—acquired a majority (83 percent) ownership in AltaVista from Compaq in exchange for $2.7 billion in stock and cash (representing a 16.4 percent stake in CMGI, as well as $220 million over three years). CMGI also decided against taking AltaVista public, canceling the pending IPO in early 2000.

Company Perspectives:

AltaVista’s venerable brand has been built from our core philosophy to help users unlock the potential of the Internet. That’s how the trust and loyalty of AltaVista’s users have made us the leading provider of search results in the world. Our founding promise to the global Internet community remains to span the Web in the widest possible spectrum to access, organize and present the most relevant content to users. And through our excellence in search and our selec-tiveness with strategic partnerships, AltaVista’s objective Web-wide perspective is reflected in every product and service we create. Since our inception in 1995, AltaVista has been dedicated to unlocking the potential of the Internet. Unlike other so-called portals which try to control user views by pre-selecting search results, our founders instilled in us an ethic of objectivity which guides our approach in everything we do. That’s why our proven technology has succeeded more than any other in delivering relevant content to worldwide markets. For Web novices and enthusiasts alike, AltaVista can be considered the one true portal through which objective Web-wide access will remain our first priority. Today, AltaVista delivers the ultimate Internet experience with the integration of content, commerce and community platforms, creating a broad range of highly distinctive products and services for our users and partners.

Late in 1999, AltaVista entered the Internet service provider (ISP) arena by becoming the first leading Internet brand to provide nationwide dial-up free Internet access (supported by advertising), signing up 500,000 users within the first three months, an unprecedented Internet event. A few months later, AltaVista unveiled a dramatic new media and commerce network of services. Besides AltaVista Search (which was, at the time, the Web’s most powerful and comprehensive guide), the company attempted to diversify into the Internet portal arena with the launch of AltaVista Live! and the expansion of its local portals service through 40 new web sites. By mid-2000, however, the company realized that these latest moves were misguided, and it canned the ISP and portals thrust, quickly returning to its core competencies of technology and search engines.

Following a strategic growth strategy, from late 1999 through late 2000, AltaVista began debuting foreign sites for Ireland, the United Kingdom, Sweden, France, The Netherlands, Italy, Denmark, Spain, India, and Australia. The India site alone covered more than 1.25 million pages of the Internet, making it the largest index of Indian web sites in the world.

In February 2000, AltaVista launched new Image, Audio, and Video search centers, creating the most extensive multimedia library on the Web to date. In November of that year, the company was awarded four more search technology patents, bringing the total number up to 38. By the end of 2000, the AltaVista web site was drawing more than 19 million visitors per month. The company had also, for a reported $160 million, acquired Raging Bull, Inc., which operated a financial information web site that competed with such heavyweights as Motley Fool and TheStreet.com. However, the following year Raging Bull was sold to Terra Lycos, Inc. In a highly volatile and costly business environment, AltaVista clearly had its hands full simply doing what it had done best since its inception: providing state-of-the-art Internet searching amidst a still growing field of feisty competitors.

Principal Competitors

AOL Time Warner Inc.; Microsoft Corporation; At Home Corporation; Yahoo! Terra Lycos, Inc.; Google; About.com; Deja.com; Disney Internet; GoTo.com; Inktomi Corporation; MyWay.com; theglobe.com.

Key Dates:

1957:: Digital Equipment Corporation (DEC) is founded.
1995:: DEC creates AltaVista search engine and organizes the business as a subsidiary company.
1998:: DEC and AltaVista are acquired by Compaq Computer Corporation.
1999:: CMGI, Inc. acquires 83 percent of AltaVista.
2000:: AltaVista acquires Raging Bull, Inc.