Terra Lycos Bid for U.S. ISP in Doubt

There were reports overseas Thursday that Terra Lycos, an Internet company headquartered in Spain, would acquire EarthLink Inc. or CNet Networks Inc., but some analysts doubted the story.

“I frankly would be surprised to see Terra Lycos acquire either one of those companies,” said Andrea Rice, managing director of Deutsche Banc Alex. Brown in San Francisco. “I think the new management team is much more focused on Europe and Latin America, where they already have a meaningful presence. I think they have resigned themselves to the near impossibility of closing the gap in the United States.”

Terra Lycos was created last year when a former subsidiary of the Spanish phone company, Telefonica, bought the struggling American Internet portal Lycos. Terra Lycos is now the third-largest Internet service provider in the world and also operates more than 100 Web sites. Rumors that the company would acquire a major U.S. Internet player have been rampant for six months.

CNet, a San Francisco-based technology news site, is seen as the less likely acquisition candidate because Terra Lycos already owns similar Web sites, which are suffering from a decline in Net advertising. CNet’s shares closed at $12.57, up 90 cents on Nasdaq, apparently as a result of the rumor.

EarthLink, the second-largest ISP in the U.S. with about 5 million subscribers, also has been struggling to reach profitability, although its revenue shot up 34% in the latest quarter. EarthLink’s shares fell 3 cents to $12.70 on Nasdaq.

EarthLink is one ISP that will be given access to cable systems owned by AOL TimeWarner, as part of the federal government’s approval of the AOL deal to spur competition for high-speed Internet access.

Terra Lycos downgraded its 2001 growth forecast this week--the company expects to break even by the middle of next year, not in December as projected. But Terra Lycos has more than $2 billion in cash, and speculators have theorized that the firm will spend that war chest to buy market share in the United States.

EarthLink and CNet declined to comment.