Overture extends key Microsoft deal
Published: 13 Feb 2002 07:31 GMT
Internet search company Overture Services said on Tuesday that it had extended a relationship with Microsoft for at least a year, a move that locks in one of its most important customers.
Overture, formerly known as GoTo, allows advertisers to pay for placement in Internet search results. The Microsoft deal will allow the company to provide results for Microsoft's MSN search, and MSN's search results page will feature Overture's top three so-called pay-for-performance listings under the heading "sponsored sites."
Overture shares were up $4.56 to $26.31, or 20 percent, in morning trading on the Nasdaq.
Investors had questioned Overture's future when it lost a deal to provide search results for Internet service provider Earthlink to Google. But Overture said earlier this month that it would top quarterly results despite losing the Earthlink deal.
Microsoft is one of Overture's key customers, which, along with America Online, accounted for 40 percent to 50 percent of its third-quarter revenue. The company has also announced an extension of its deal with Yahoo! through the end of the second quarter.
Overture is expected to formally announce fourth-quarter results after the market closes on Tuesday. The company said last week that it would report a second straight quarterly profit.
Goldman Sachs analyst Anthony Noto added the stock to his "recommend list" on Tuesday, saying in a research note that he believes domestic revenue could grow at 19 percent through 2006. International revenue, meanwhile, should generate a "meaningful portion of revenues by 2004 as the company gains traction in its new markets," Noto said, adding that he expects international sales to account for 27 percent of total revenue by 2006.
Noto said he didn't think losing the Earthlink deal would hurt the company's chances with other customers, such as Microsoft and AOL.
"We believe there is room for multiple players in the space," he said, adding that Overture's dynamic pricing and the power of its established advertising network would "support their ability to maintain a significant leadership position much in the same way that eBay was able to do when Yahoo and Amazon entered the auction market."
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