Internet search engine Ask Jeeves has agreed to buy rival Interactive Search Holdings for $328m (Ј180m), in a move that will double its market share.
The announcement will turn up the heat on industry leader Google, which last month said it was taking increased competition from Yahoo more seriously.
It also will underpin optimism that the technology sector is recovering.
Ask Jeeves shares surged 40% on the news, with investors saying that the company will now grow more quickly.
The acquisition will increase Ask Jeeves’ market share to 7% by adding the iWon, Excite and My Search web sites to its Ask.com search engine.
According to Kaufman Brothers analyst Mark May, before the deal Ask Jeeves had “not been considered a significant player” in the industry.
Buying Interactive Search means “they can now cross-promote their various properties and increase [market] share even further.”
Ask Jeeves’ chief financial officer Steve Sordello reckons profit will be boosted almost immediately and the company has predicted combined annual sales of as much as $230m compared with sole revenue of about $148m.
Capping a good day, Ask Jeeves also lifted its first quarter profit forecast to $37m.
Google, however, is still well ahead of the field.
According to industry figures for November, the company accounted for almost 80% of the search engine market. That share, however, is expected to shrink to around 50% in coming weeks after Yahoo said it would stop using Google technology.
Even though it is leading rivals, Google has already said it is looking over its shoulder and is working hard to maintain its dominant position.
Speaking last month, company co-founder Sergey Brin said: “There’s a new level of competition and we need to take it seriously.
“We’re definitely seeing much more attention going to search from Microsoft and Yahoo.”
For its part, Yahoo has recently made a number of big investments in the search engine field, buying up a number of companies.
It also reckons that new technologies will eventually see it power nearly half of all web search queries in the US.