Lycos Inc. (LCOS) 42 5/16: Shares of search engine and Internet portal should open higher this morning after
the company posted better-than-expected Q4 results last night. While on an operating basis, Lycos reported
a Q4 net of $0.01, one cents ahead of expectations, revenues for the period rose 137% to $45.1 mln and 29%
on a sequential basis. Wall Street seems to be pleased with the results as Lycos achieved profitability ahead
of schedule, excluding non-recurring items incurred in the break-up of its merger with USA Networks (USAI 48
1/8) as well as acquisition costs. Already, PaineWebber has upgraded the stock from "neutral" to "buy" and
established a 12-month price target of $75, while Hambrecht & Quist has reiterated its "buy" rating. Wall
Street is encouraged by the growth trend in revenues that is being led by its advertisement group. While
current advertisement revenues make-up about 70% of the company's total sales, Lycos is trying to even out
the contribution from its electronic commerce component so that in the end, each component is contributing
50-50 to its total sales. Lycos does not expect to reach this type of equal contribution until the year 2000 at
the earliest, but seems to be making progress in becoming a dominant aggregator of content. To this end, the
company has launched today its Merchant Center, a new service that allows online merchants to integrate
their stores into Lycos Shopping , targeting small and medium businesses to easily and inexpensively enter
the world of e-commerce. This launch comes in time to take advantage of the upcoming busy holiday
shopping season and allows most merchants to build cyber-stores in a matter of minutes instead of months.
The company is also setting its sights on expanding its market exposure overseas, particularly in China,
Singapore, Malaysia and Latin America as these economies recover from the down economic cycle they have
been for the past couple of years. Lycos wants to be part of this emerging markets recovery and seems ready
to take advantage of the changing environment for how business is conducted by merchants and advertisers. |
