Overture Services Inc, owner of an Internet-search service that charges Web sites for prominent placement in its results, agreed to buy CMGI Inc's AltaVista Web-search service for US$140 million.
Overture will pay US$60 million in cash and stock now valued at US$80 million, the companies said in a statement.
Overture also will assume an undisclosed amount of Alta-Vista's liabilities.
The purchase will be "dilutive" to Overture's earnings "in the near term," chief financial officer Todd Tappin said on a conference call with analysts.
Overture shares fell as much as 9.6 percent.
"We know numbers are going to be lower, but we don't know how much lower," said Troy Mastin, an analyst at William Blair & Co in Chicago, referring to the earnings dilution. He rates Overture stock "market perform" and doesn't own it personally.
AltaVista will add to Overture's earnings by the middle of next year, the companies said in a statement.
Pasadena, California-based Overture, whose search engine is used on Web sites run by Yahoo Inc and Microsoft Corp's MSN Internet service, said AltaVista owns technology that will improve the performance of Overture searches.
The AltaVista technology conducts searches using relevant criteria other than whether a company paid for prominent placement in the search.
The sale of AltaVista comes less than four years after CMGI bought it from Compaq Computer Corp for US$2.3 billion in 1999.
Shares of Andover, Massachusetts-based CMGI, an Internet "incubator" that attempted to develop profitable Web-commerce businesses, traded as high as US$163.50 at the peak of the Internet bubble in January 2000. The shares collapsed later that year and closed on Tuesday at US$0.83 on the NASDAQ.
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