Lycos CEO Drums Up Support for Deal
Lycos Inc. Chief Executive Robert Davis on Friday posted a vision of unprecedented synergistic shopping after a merger with USA Networks, trying to drum up support among shareholders for a deal he said he hoped would close in June.
Under pressure from a falling stock price that has led its largest investor, CMGI, to say it won’t vote for the merger at current levels, Davis said the combined company would have “one of the strongest financial platforms anywhere on the Internet.”
Davis said the company would combine the nearly 50% Internet audience reach of Lycos with the “interactive television” of USA Networks’ Home Shopping Network, which could sell computer-related products to viewers while directing them online for more information and choices.
“What company is better prepared to be the leading e-commerce company? There might be one, but I can’t find it,” Davis said at a New York news conference.
He said Lycos will continue to pursue its pending acquisition of Wired News and the search engine HotBot, and after the USA acquisition will devote new sites to such Home Shopping Network stalwarts as jewelry and clothing.
Davis said the cable channel’s calling centers, warehouses and delivery systems would be a natural fit for Lycos.
“Home Shopping Network has put $500 million into back-end infrastructure. We’ll have more in earnings out of the box than others have in revenue,” he said.
Shareholders weren’t buying. Lycos shares slid $5.38 to close at $87.63, down from a high of $137 on Feb. 5.
Davis said his Framingham, Mass.-based company is committed to the USA deal, which analysts believe may be renegotiated. He also said he has not been speaking with other companies that have expressed interest in buying Lycos.
“The chances of renegotiation are significant,” said analyst Andrea Williams of Volpe Brown Whelan in San Francisco. “The big question is how to value this company. Is it going to get an Internet multiple?”
Stocks in Internet companies, many of them profitless, have been trading at prices based on their revenue and potential for future earnings. More traditional companies, such as Barry Diller’s USA Networks, historically trade at a multiple of their current income.
Davis said he would serve as chief executive of the combined company, with Diller becoming chairman. USA Networks would supply most of the assets, and its shareholders would own most of the combined company, which will be called USA/Lycos.
