Lycos fetches a paltry price
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 7:55 AM ET Aug. 2, 2004
SAN FRANCISCO (CBS.MW) -- Wasn't it just yesterday that Lycos was sold to Terra Networks for $5.8 billion in stock?
Actually, it was more than three years ago. But now, South Korean Web site operator Daum Communications said it's buying Lycos from Terra Lycos for $95 million, according to published reports.
Early Monday, Terra Networks (TRLY: news, chart, profile) confirmed the transaction, which it valued at $545 million. The Madrid-based Internet unit of Spanish telecommunications giant Telefonica (TEF: news, chart, profile) said the book value of the assets to be received prior to the sale is initially estimated at about $435 million, yielding a $105 million price tag for Lycos.
The deal didn't come as a surprise to Lycos observers. Analysts had been expecting Terra Networks to dispose of Lycos for some time. Interactive Search, which was formerly known as Focus Interactive, had been eyeing Lycos last summer. See Net sense.
Earlier this year, Ask Jeeves (ASKJ: news, chart, profile) bought Interactive Search for $343 million.
The Lycos price tag of less than $100 million should give anyone pause about the prices paid for promising companies.
Back in May 2000, Terra Networks initially valued Lycos at $12.5 billion when it was first announced in mid-May, but the value of Terra Networks' American-listed shares plunged in recent months, cutting nearly $7 billion off the buyout price. See previous story.
What does Bob have to say?
Bob Davis was at the helm of Lycos at the time the search engine went public in 1996, along with Yahoo (YHOO: news, chart, profile) and Excite, which was eventually merged with AtHome, and then subsequently went into bankruptcy. Excite's assets were eventually sold for $10 million.
Davis is now a venture capitalist at Highland Capital Partners. He said he joined the VC outfit on the day he left Lycos back in 2001.
But Davis still has his hand in the search industry. He's invested in Quigo, a search technology company. Davis says that businesses that can maximize return on investments for paid-search advertisers will be a growth area.
Given that Davis sold his search company for such an inflated price, the question to him is: Does he think Google is worth $32 billion, and what's the next stage of growth for search?
The next stage of growth for search, Davis believes, is that Google goes public and the hype slows down.
Given that Davis believes there is hype, and there certainly was that during 2000 when he sold his company for an inflated price, the question to ask is: Is Google's price hyped?
Davis didn't exactly answer that question, only to say: "It's a pricey transaction. Google is worth whatever the market will support."
He did suggest however that prices may not hold up. That's certainly the case with his former company, which went from a valuation of $12.5 billion to $95 million in less than four years. |
