Yahoo! will purchase GeoCities; shares leap; Internet gateway will be acquiring 3.5 million customers; Cyberspace


SANTA CLARA, Calif. -- Yahoo! Inc. agreed yesterday to buy GeoCities for $3.56 billion in stock, giving the world's biggest Internet search service more than 3.5 million customers with personal Web pages.

The offer valued GeoCities at $113.66 a share, or a 52 percent premium, based on the closing price Wednesday. Yahoo! will issue 0.3384 shares for each GeoCities share.

The acquisition combines the most traveled gateway on the Internet with one of the most popular Web destinations.

Yahoo! is capitalizing on the Internet boom by using its shares, which have soared more than 12-fold in the past 12 months, as currency to acquire the largest provider of personal Web pages. It wants to offer users more services to blunt aggressive forays by rivals.

"GeoCities has eyeball attention, it has a loyal user base and it made sense to partner or to do something that really filled the hole Yahoo! had," PaineWebber Inc. analyst Jim Preissler said.

"GeoCities has built the Web's most popular and widely used community," said Tim Koogle, chairman and chief executive of Yahoo!. "We are combining two of the Web's strongest brands and most heavily used services into one powerful offering."

GeoCities shares jumped $42.25, to $117.25, yesterday. Yahoo! climbed $31.88, to $367.75.

Yahoo! said it expects to take an unspecified second-quarter charge to complete the acquisition. Yahoo! said GeoCities' outstanding options will be converted into Yahoo! options. The acquisition will be accounted for as a pooling of interests.

Yahoo!, the brainchild of Stanford University graduate students Jerry Yang and David Filo, began as a Web search service in 1994. The Santa Clara, Calif.-based company added free e-mail, chat, news, stock quotes, personalized online calendars and other popular features, which built a loyal following. It earned money by charging advertisers and partners to reach its audience of Web users.

Yahoo! draws an average of 167 million page views a day, nearly triple its nearest rival, Excite. A page view is one electronic page of information pulled up at a user's request.

As its traffic increased, so have its shares, soaring 2,729 percent since the initial public offering in April 1996.

Yahoo! is one of a handful of Internet companies that are profitable. GeoCities, which was founded in 1994, is losing money. Its fourth-quarter loss widened to $8.4 million, or 27 cents a share, from $3 million, or 14 cents, a year earlier. Revenue more than quadrupled to $7.5 million from $1.7 million a year ago.

For 1998, the company's loss widened to $19.8 million, or 71 cents, from $8.9 million, or 44 cents, in 1997. Revenue climbed to $18.4 million from $4.6 million.

GeoCities allows Internet users to create their own personal Web pages. It provides a virtual community for Internet users, called "homesteaders," to share ideas and publish content accessible to users with common interests. Its shares have more than doubled since it went public in August 1998.

Last year, Yahoo! bought a $5 million stake in GeoCities and the companies signed an agreement to help promote one another's sites.

GeoCities' December traffic was an average of 53 million page views daily, up from 44.8 million in September. GeoCities had 1.6 billion page views in December, more than double the amount a year earlier.

Its personal publishing services have made it one of the top three individual sites on the Web.

"This combination will allow us to accelerate our offerings to GeoCities and Yahoo! users worldwide," said Tom Evans, chief executive of Marina del Rey, Calif.-based GeoCities.

Yahoo is attempting to solidify its lead on the Web because media and technology giants are increasing their involvement in online businesses to reap more revenue from the Internet.

Pub Date: 1/29/99

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