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CALIFORNIA / News and Insight on Business in the Golden
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Deals Indicative of Scramble for Internet Allies

May 05, 1998|GREG MILLER | TIMES STAFF WRITER

SAN FRANCISCO — Four of the Internet's leading companies were involved in two separate deals Monday that underscore the intense jostling and ongoing scramble for allies among online firms.

The larger of the deals involved Netscape Communications Corp., which said it will collect at least $70 million through a partnership with Excite Inc. in which the companies will combine to create a new search service and other content on Netscape's flagship Web site.

The second deal pairs AT&T Corp. and Lycos Inc. in a three-year plan to develop a range of unique online services, including one that will supposedly enable users to switch from exchanging typed messages in chat rooms to actually speaking with one another.

Both agreements reflect the effort by these companies and others to assemble giant "portal" sites to which millions of consumers will flock for information, e-mail and assistance in navigating the Net.

Analysts said the deals put new pressure on competitors, including Yahoo Inc., whose navigation site is the most popular destination on the Net. According to terms of its deal, Mountain View-based Netscape will get an up-front payment of $70 million from Excite, plus a share of the advertising revenue generated by the new services created under the merger.

Excite, a Redwood City-based navigation site, expects traffic to its site to swell by up to 25% over prevailing levels because of the visibility its services will enjoy on Netscape's high-profile site. That translates into millions of additional pages on which Excite can sell ads.

"This deal can certainly affect the balance of power in terms of traffic on the Internet," said Danny Rimer, an analyst at Hambrecht & Quist in San Francisco. "Two very significant online highways have become one."

Netscape has long rented space on its http://www.netscape.com site to many Internet navigation companies, but now Excite's search engine and directory will become the premier service, and the only one bearing the Netscape brand.

In addition, Excite will deliver a number of so-called content "channels" in categories including real estate and shopping.

Netscape shares climbed $1.88 to close at $29.56, while Excite shares rose $5.81 to close at $72.81. Both stocks trade on Nasdaq.

The deal between AT&T and Waltham, Mass.-based Lycos, also a navigation site, is meant to create a new breed of services that combine the functionality of the telephone and the PC.

In addition to the voice-based chat service, executives said they are also developing online directories that will enable users to initiate a call with the click of a mouse.

AT&T shares closed at $62.06, up $1.31 on the New York Stock Exchange. Lycos shares soared 8% to $68.63, up $5.25 on Nasdaq.

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