Yandex has international ambitions

NEW YORK Wed May 25, 2011 9:25am EDT

1 of 4. Yandex founder and CEO Arkady Volozh (front, 2nd R) celebrates as Yandex is listed on the Nasdaq exchange during their IPO at the Nasdaq market site in New York, May 24, 2011.

Credit: Reuters/Mike Segar

NEW YORK (Reuters) - Internet search company Yandex, fresh from raising $1.3 billion from an IPO, now has the clout to make an impact farther from its Russian heartland.

The IPO is the biggest U.S. Internet listing since Google Inc went public in 2004, and is a long-held plan for the two founders, who met as teenagers at school.

Chief Executive Officer Arkady Volozh said the company's success was emblematic of a new Russia -- distinct from the country's energy-focused economy -- and said there is a place in the world for a "global technology company born in Russia".

"Russia is famous for its resources," said Volozh. "But Russia also has a lot of talent... Russia deserves to have a technology company of a global level."

The IPO values Yandex at around $8 billion but the duo, who founded Yandex in 1997, will retain most of their holdings.

Their rise is distinct from many of Russia's other billionaires, a number of which built their empires during the 1990s and profited from a boom in commodities.

Chief Technology Officer Ilya Segalovich, 46, described how the pair met at school, excelled at math and physics and got such good marks that teachers suspected them of copying.

Volozh, who has a degree in applied mathematics, began working on search technology in 1989. A year later, he started his own search software development firm, where he was joined by Segalovich, who had studied to be a geophysicist.

Yandex was founded in 1997.

In 2000 Yandex lost $2 million on revenue of $72,000. Last year the company generated revenue of $445 million and earnings of $135 million.

"I see this as one day on our way -- not the end," Segalovich said.

Now the company is looking at several ideas to go beyond its current business model, such as further expansion beyond Russia, although he declined to give details.

"We have several ideas (about) how to go beyond our current business models," Segalovich said. "Definitely there are some new business models we are trying to explore and also international expansion is one of the new areas for us."

Segalovich said Yandex has not yet decided how to use the proceeds of the IPO but that it could be potentially useful for acquisitions, noting that Yandex's rivals have large cash piles themselves.

"The landscape may change very fast," said Segalovich. "We may require maybe (an) acquisition or changes in strategy ... The Internet is very dynamic and growing very fast and all our big rivals are very rich."

SOPHISTICATED ALGORITHMS

Yandex's search algorithm, originally developed to conduct keyword searches of patents, Russian classical literature and the Bible, was a breakthrough as it accounted for the Russian language's complex grammar.

The duo coined the name "Yandex" -- with "Ya" standing for the Russian equivalent to English pronoun "I" -- as Segalovich was experimenting with derivatives of words that described the essence of the technology.

The full name originally stood for "Yet Another iNDEX." Today the word "Yandex" has become synonymous with Internet search in Russian-speaking countries, as people suggest "asking Yandex" for answers to their inquiries.

Segalovich said Yandex was not language specific and could create world-class products. Yandex has a website with limited coverage of English language pages, he said, describing the quality of those pages as good.

Launching the IPO on Nasdaq on Tuesday, Volozh called out in Russian Yandex's tagline "Everything will be found" and offered some advice for tech entrepreneurs in Russia looking to become the next Yandex.

"Stick to your ideas, grow them into real businesses, serve your audience, focus on quality, have fun and get rich," he said.

Yandex shares closed up 55 percent, or $13.84 to $38.84.

(Reporting by Megan Davies, editing by Matthew Lewis and Carol Bishopric)

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