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Ask Jeeves to Double Search Share with Acquisition

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NEW YORK (Reuters) - Ask Jeeves Inc. (NasdaqNM:ASKJ - news) said on Thursday it would buy Interactive Search Holdings Inc. for about $328 million, rocketing the stock by as much as 43 percent as the company seeks to compete with the top Internet search engines Google and Yahoo.

The company said its plan to acquire the owner of search Web sites iWon, Excite and My Search would double Ask Jeeves' market share in the increasingly cut-throat industry to 7 percent, and would also boost its profits.

The deal solidifies Ask Jeeves' standing as a competitor in the market for Internet search and boosts its ability to negotiate with partners, the largest of which is Google, analysts said.

"They have always been a player in the search category, but with market share of only about 3 percent, they have not been considered a significant player in the space," Kaufman Bros. analyst Mark May said.

"This makes them a more important player by not only doubling their market share, but because they can now cross-promote their various properties and increase the share even further," he added.

Ask Jeeves, based in Emeryville, California, could pay up to $17.5 million more based on Interactive Search's performance. The companies expect the deal to close by the end of the second quarter.

Interactive Search had 700 million searches in the fourth quarter compared with 680 million for Ask Jeeves.

The companies approach search differently.

Ask Jeeves, which made its name with its original question and answer format, but has since moved to a technology that uses traditional keyword queries, returns results based on a proprietary analysis of popular links.

Interactive Search's sites return results based on the most popular links using search leader Google or offers results from multiple search sites on its My Search site.

"This acquisition fits exactly into our strategy of building multiple brands," Ask Jeeves Chief Executive Steve Berkowitz said during a conference call with analysts and reporters.

"Ask Jeeves doesn't have the answer for everybody," he added. "It's one approach to search. This just enhances our abilities to meet consumers in the places they want to be met."

Ask Jeeves expects the deal to nearly triple its profit excluding acquisition costs and amortization of intangibles in 2004 to between $57 million and $60 million from about $22 million last year. The company said it could not yet estimate net income on a generally accepted accounting basis for 2004.

Steve Sordello, Ask Jeeves' chief financial officer, said the acquisition would add to the company's profit "right out of the gate." He said he expected Ask Jeeves would close the transaction by the end of the second quarter.

It is projecting combined revenue after the deal closes of between $220 million and $230 million versus a stand-alone anticipated revenue of $148 million.

Separately, Ask Jeeves raised its guidance for the first quarter, saying it expects $37 million of pro forma income of 18 cents a share, up from earlier projections of $35 million and 15 cents a share.

Ask Jeeves shares closed the day up $8.30, or about 40 percent, to $29.01. Earlier, the stock climbed as high as $29.63 (Additional reporting by Lisa Baertlein and Michael Learmonth)

March 5, 2004 at 09:13 AM in Portals | Permalink | TrackBack (64) | Top of page | Blog Home