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IAC to Pay $1.85 Billion for Ask Jeeves
PHILADELPHIA (Reuters) - Internet conglome
rate IAC/InterActiveCorp (IACI.O: Quote , Profile , Research ) on Monday said it would buy Web search engine Ask Jeeves Inc. (ASKJ.O: Quote , Profile , Research ) for $1.85 billion in stock as it seeks to capitalize on growth in the Internet advertising and search markets. The purchase will pit media mogul Barry Diller's IAC squarely against Web search giants Google Inc. (GOOG.O: Quote , Profile , Research ) , Yahoo Inc. (YHOO.O: Quote , Profile , Research ) and Microsoft Corp. (MSFT.O: Quote , Profile , Research ) at a time when online search advertising is booming and Internet media companies are again selling at steep valuations. "It's an aggressive move by IAC. We think they'll face many challenges," said Susquehanna analyst Marianne Wolk. "They'll have to invest significantly to improve the search engine," she said, noting that Google, Yahoo, Microsoft and others are investing heavily to improve their own search engines. Based on IAC's closing stock price on Friday, the deal values Ask Jeeves at $28.24 a share, a premium of 17 percent to its Friday closing price. Ask Jeeves would be one in a stream of acquisitions for IAC, which earlier this month said it would buy catalog and online retailer Cornerstone Brands for $720 million to expand across multiple retail outlets. IAC has a variety of Internet businesses, including Home Shopping Network, Web directory CitySearch, and online
mortgage provider LendingTree. It also owns travel Web site Expedia, which it plans to spin off. David Garrity, an analyst with Caris & Co., said the Ask Jeeves deal could have negative implications for Google because IAC may leverage its other Web sites to make Ask Jeeves a stronger competitor. Ask Jeeves currently gene
rates about 70 percent of its revenue from advertisements brokered by its partner Google. Garrity said Diller may ask for a better deal based on a strengthened Ask Jeeves. "Google's growth profile is likely to come under review as it may potentially lose an important partner," Garrity said. According to Jefferies & Co., Ask Jeeves trades at about 15 times cash flow, compared with ratios of 23 at Google and Yahoo. IAC will issue 1.2668 shares of its stock for each Ask Jeeves share and then buy back at least 60 percent of the shares it issues to help offset the dilutive effect of the deal. Ask Jeeves, known for the cartoon butler mascot named Jeeves on its Ask.com Web site, nearly doubled in size last year when it bought Interactive Search Holdings for $501 million. That included Web properties such as My Way, iWon, Excite, My Search and My Web Search. Shares of Oakland,
california-based Ask Jeeves were up 13 percent at $27.43 in morning trade on the Nasdaq stock market, while IAC fell $1.13, or 5 percent, to $21.15. Shares of several smaller Nasdaq-traded Web-search firms were also boosted by the deal. LookSmart Ltd. (LOOK.O: Quote , Profile , Research ) rose nearly 14 percent to 91 cents, Mamma.com (MAMA.O: Quote , Profile , Research ) added 6.4 percent to $3.47, while FindWhat.com (FWHT.O: Quote , Profile , Research ) advanced nearly 6 percent to $10.43.
Source: reuters.com