Friday, September 24, 2004

Microsoft defends LookSmart breakup

October 10, 2003

Microsoft has defended its decision to end a partnership with local dotcom export LookSmart which dealt a devastating blow to the internet search company.

Kate Mackenzie Microsoft Australia chief executive Steve Vamos said it was all in the name of business. "Obviously it's a very difficult decision," Mr Vamos told Australian IT.

"Nobody was particularly happy about it, but that's the nature of difficult business decisions." The agreement with Microsoft's global internet company MSN accounted for two-thirds of LookSmart's revenue.

LookSmart is Australia's best-known internet export, and one of the few to survive the dotcom crash of 2000. Founded by a Melbourne husband and wife team, Evan Thornley and Tracey Ellery in their garage in 1995, it typified the roller coaster ride of the internet economy. In 1997 they moved to the US to make San Francisco the company's worldwide headquarters, and listed on the Nasdaq stock exchange, which lead to the pair being valued at $1 billion during the height of the dotcom boom.

Both LookSmart and its Australian subsidiary weathered the crash that followed by a clever re-invention that finally made LookSmart profitable early this year. While most analysts and commentators tipped LookSmart to survive the blow, it will likely be in a greatly changed form.

The LookSmart decision was widely seen as part of Microsoft's strategy to take on the leading search engine, Google, by building its own internet search technology. Mr Vamos denied it was part of anything other than a strategy to "deliver the most compelling service to our customers".

He said there was no ill will between the two companies and that the local MSN joint venture, ninemsn, would continue in its partnership with LookSmart Australia. However he conceded this was much smaller than the US agreement.

"It obviously doesn't make up for the impact of the broader decision, but the fact remains that we're working together."

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