Lycos CEO Defends Deal, Sees Sell-Off Overdone By Eric Auchard
NEW YORK (Reuters) - Lycos Inc. (Nasdaq:LCOS - news) officials Tuesday defended a planned merger with USA Networks' Home Shopping Network and Ticketmaster Online-CitySearch Inc., saying the move would create an electronic commerce powerhouse.
Lycos President and Chief Executive Bob Davis and Chief Financial Officer Ted Philip told an audience of professional money managers attending the annual Goldman Sachs Technology Symposium that Tuesday's 25 percent drop in the price of Lycos stock showed the deal was misunderstood.
Lycos fell more than $40 following announcement of the complex merger early Tuesday, but recovered somewhat to close at $94.25, down $33 on the day in Nasdaq trading.
USA Networks gained nearly 9 percent to close at $41.62, up $3.69. Ticketmaster stock lost about 27 percent of its value, or $15.50, to close at $42.25. Both stocks trade on the Nasdaq index.
The combined company will have revenues of $1.5 billion, strong cash flow and live up to other traditional measures of major media companies, Davis said, adding it offered ''all of the excitement of the Internet combined with substantial earnings...and cash flow.''
''This will be seen as a defining moment'' for Internet companies, Davis predicted.
But several professional money managers in the Goldman audience expressed bafflement at the deal's complexities, and at least one said she feared Lycos had been out-negotiated by master deal maker Barry Diller, the chairman of USA Networks.
Davis fended off the criticism, saying some investors appeared to have mistakenly equated Lycos' pre-deal market capitalization of around $6 billion with the market value of USA Networks by failing to include the more than 40 percent stake held by Seagram Ltd. and Liberty Communications.
USA Networks' own market capitalization was about $13.5 billion compared to Lycos' $6 billion, or roughly commensurate with the terms of the deal, he said. Another $10 billion for the value of Lycos and Ticketmaster Online makes the new company worth well in excess of $20 billion, he said.
The confusion, Davis said, may have led some investors to see Lycos as getting the short end of the stick by receiving only half as many shares in the new company, to be known as USA Networks Lycos Interactive Inc.
Still, Davis declined to fix an absolute value to the merger. Instead, he turned the question back to the audience, saying it was up to shareholders of the new company to determine what the deal was worth in the give and take of the stock market.
''It's up to you to set the value of the deal,'' he said, referring to possible shareholders in the audience.
Davis said the jackpot for the new company's shareholders lay in how the deal can unlock the Internet's potential for USA Network's Home Shopping Network (HSN) and other properties.
He set forth plans to offer a range of electronic commerce options to a potential audience of 70 million Home Shopping television viewers and Lycos' roughly 30 million monthly Web network visitors.
The company would rely on HSN's staff of 2,000 phone service operators and a processing, order and online retailing system that is currently able to handle 200,000 items a day, which he said was far larger than any Web-based shopping company, even Amazon.com Inc.
In the near-term, Davis sounded a confident note on results for the Lycos' fiscal quarter ended in January, which the Waltham, Mass.-based Internet media firm is set to report Feb.
24. ''I am certainly very confident of the continued success of our business model,'' he said referring to the earnings report. |
