Jeeves Excites Investors

Ask Jeeves (NASDAQ:ASKJ) stepped up efforts to grab a greater share in the search space today, announcing that it will acquire Interactive Search Holdings. The news electrified investors, who drove the stock up well over its previous 52-week high.

If you're wondering whom Jeeves is hooking up with, it's the name behind several Internet search properties, some of which you might recognize: Excite, iWon, My Way, and My Search, among others. The deal will have a price tag in the $343 million range.

Ask Jeeves also made paid search look good with an improved outlook for first-quarter earnings. It said it now expects to earn $37 million, or $0.18 per share, compared to previous calls for $35 million, or $0.16 per share. It also expects the deal to boost its 2004 profits to the $57 million to $60 million range, or about triple last year's.

Search, of course, is currently all the rage. Between the long-awaited Google IPO, Yahoo!'s (NASDAQ:YHOO) recent acquisition of Overture, and talk of Microsoft's (NASDAQ:MSFT) work on its own search capabilities, it's obvious that search is the coveted "app" in today's Internet.

For anyone who balked at Ask Jeeves' question-and-answer format, the acquisition gives the search engine provider some Internet properties that use more traditional search techniques. It could double the number of searches that corporate Ask Jeeves performs, judging by data from the fourth quarter. In that period, it performed 680 million searches while Interactive Search, which reaches 17% of U.S. Internet users, clocked 700 million searches.

The deal is reportedly set to close by the end of the second quarter, and is expected to double Ask Jeeves' share of the search market to 7%.

However, according to a recent feature in Wired magazine, Google serves up 200 million requests each day. That's not surprising; it's widely known that it's used for more than 70% of all searches. If seven out of 10 of us will immediately key up that brand for any range of urgent or mundane questions, it stands to reason that just about everybody's Google crazy.

It's neat that that butler guy will widen the scope of Ask Jeeves' search and improve its 2004 outlook. But whether today's skyrocketing stock price -- at one point, it clocked a 40% surge -- is warranted seems questionable. With search dominated by Google and eyed by heavyweights like Microsoft, Yahoo!, and an array of other smaller players, one might wonder -- how long will begging for search scraps be lucrative?

Are you searching for stock ideas that aren't in such a hot area? Check out Tom Gardner's Hidden Gems .

Alyce Lomax does not own shares of any companies mentioned. She always turns to Google.