DISNEY SAID TO BE EYEING NET SEARCH SPECIALIST; MOVE WOULD BOLSTER FIRM'S WEB PRESENCE.

Byline: Dave McNary Daily News Staff Writer

Widespread rumors have emerged that Walt Disney Co., as part of its strategy to compete aggressively on the World Wide Web, is in talks to make a major investment in Internet search specialist Excite Inc.

Advertising Age reported this week that Disney is in talks to buy up to 40 percent of Excite, the second-most-popular search Web site behind Yahoo! Inc., as part of a plan to make all Disney Web sites available through an umbrella entry point that could be called D Guide or Go Online.

Buying 40 percent of Excite would likely cost Disney at least $800 million. Excite spurned an unsolicited $1.68 billion buyout bid at $72 a share two weeks ago from Zapata Corp., a Houston-based fish-meal processor trying to diversify onto the Internet.

Disney and Excite officials declined to comment on the Ad Age report, which was sourced to an unnamed executive familiar with the discussions. Analyst Abhishek S. Gami of William C. Blair said speculation about a Disney-Excite alliance have been ``floating'' around Internet chat rooms recently.

``I have no idea if the rumors are true but I would never say never,'' Gami said. ``Excite would represent a great distribution vehicle if Disney felt the time was right.''

Excite, of Redwood City, currently generates traffic of 40 million pages viewed daily and themes its site in red and yellow, as opposed to Yahoo's more subdued blue and gray. It offers both the Excite and WebCrawler search engines and services for electronic commerce, direct marketing and classified ads.

Deal speculation started after Chairman Michael Eisner announced in April that Disney wanted to become a ``gatekeeper'' to the Web. Burbank-based Disney operates several prominent sites, including Disney.com, Daily Blast subscription service, ESPN Sportzone, ABC.com and ABCNews.com and recently agreed to buy the two-thirds of Web publisher Starwave it did not already own.

``Disney has been doing a pretty good job of providing content,'' Gami said.

As for Excite, it has lost more than $100 million since its 1995 start-up, including a $6 million loss in the 1998 first quarter that was less than analysts expected. Revenue more than tripled to $23 million from $7.5 million in the 1997 quarter.

Excite has alliances with America Online, Intuit, Netscape, Prodigy and Tribune Co. Its stock price hit $91 in April after Yahoo's first-quarter earnings prompted a surge in Internet stocks but fell back in recent weeks and closed Wednesday at $55, off $1.125.

STOCK SLIP

Disney closed at $109.06, off $.06. Excite closed at $55, off $1.13.