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Google plans to buy travel search firm for $700m

With ITA deal, Web giant becomes player in growing market

By D.C. Denison
Globe Staff / July 2, 2010

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In its biggest acquisition deal of the year, Google Inc. agreed yesterday to buy ITA Software Inc. in Cambridge for $700 million, giving the Internet’s dominant search engine an entree into the rapidly growing online travel industry.

Google’s offer prevailed over late bids from Microsoft and other travel and search related companies that were hoping to prevent Google from taking over ITA.

The Cambridge firm makes sophisticated software for major online travel services such as Orbitz.com and Kayak.com, and airlines such as Continental Airlines Inc. and Air Canada. ITA’s software uses algorithms to combine and parse flight information from airlines, including pricing and availability data, to create an up-to-date database that can be searched by consumers.

In a conference call after the agreement was disclosed, Google chief executive Eric E. Schmidt said that “airline travel and search are a perfect combination,’’ and that the purchase “opens exciting possibilities for us to create new ways for users to more easily find flight information online.’’

Schmidt said Google plans to use ITA’s software and expertise to create new tools to make it easier for users to comparison shop for flights and airfares, and enrich the general search the company currently offers.

The deal is Google’s sixth-largest acquisition in company history.

Nearly 50 percent of airline tickets are purchased online. Microsoft’s Bing search service, which competes with Google, already has a prominent travel area that uses ITA software, and features tools like ticket price predictors.

Schmidt said Google has no plans to sell airline tickets directly to consumers, but instead will drive potential customers to airline and online travel agency websites.

In an interview, Jeremy Wertheimer, chief executive and president of ITA, said that although “there were other offers that came in, unsolicited,’’ the Google offer “was the best for our investors, our employees, who will be hooking up with a company they want to work for, and our customers.’’

Wertheimer said the Google deal gives ITA “access to a really big technical platform, and access to excellent people.’’

ITA was founded in 1996 by computer scientists from MIT. In 2006, it raised $100 million in venture capital, one of the largest venture capital deals of that year, in a round led by Battery Ventures of Waltham. Another local venture firm, General Catalyst Partners of Cambridge, is also an investor in ITA.

Today, the company, which is based just a few blocks away from Google’s offices in Kendall Square, has 500 employees.

Google and ITA also share a high regard for tech geek culture.

A few years ago, during a recruitment campaign, ITA posted a series of ads on MBTA subway cars that featured complex mathematical puzzles. Candidates were required to solve a puzzle in order to apply for jobs. Today, the company still requires candidates to complete complex puzzles as a part of the application process.

The deal between Google and ITA is likely to attract scrutiny by US antitrust regulators, because it would combine the largest search company with a dominant travel search site.

In the teleconference, Google’s Schmidt said that he expected a “significant’’ regulatory review of the deal.

D.C. Denison can be reached at denison@globe.com.