Lycos Faces the Critics
The Take
February 26, 1999
by Phil Harvey
During his third week on the job and on the last day of the BancBoston Robertson Stephens technology conference Thursday, Lycos Inc. (LCOS) Executive Vice President Ronald Sege found himself re-explaining the intricate workings of the proposed merger between Lycos, Ticketmaster Online-City Search Inc. (TMCS), Home Shopping Network, Ticketmaster and Internet Shopping Network/First Auction.
Sege, formerly a senior vice president at 3Com Corp., says the soon-to-be-formed USA/Lycos Interactive Networks Inc. is, amongst other things, about making money from those currently online and the some 65 percent of the U.S. population that is still offline.
In the process of making his case for investors and money managers at the conference, Sege hit some statistical highlights that haven't been as publicly discussed as the shareholder backlash of the deal itself. Judging from the reactions of some in attendance after the presentation, however, Sege's well-aimed words could not lift the fog of doubt that has shrouded the immensity of the deal's potential.
Perhaps, at least for this venture, seeing is the only way of really believing--and understanding.
Still, Sege hit on some enticing stats. For instance, he says the new company will have access to 20 million consumer credit card accounts and their associated profiles. And the potential reach is even larger. The combined company, Sege says, can at some point market to and get revenue from some 50 percent of the Internet population and 70 percent of TV viewers, if all goes as planned.
In the physical world, there are also opportunities waiting at the 2,900 stores that sell tickets through Ticketmaster. And, he says, Ticketmaster Online's average transaction is around $100.
Also, Sege attempted to squelch talk of the Home Shopping Network being a mall for shut-ins who buy nothing but cheap jewelry and bizarre kitchen appliances. "HSN sold $20 million worth of computer equipment in one day back in the fourth quarter of 1998," Sege says.
"The Home Shopping Network was the first iteration of interactive media," he says. You see it, you like it, you buy it ... exactly what you can do with e-commerce.
Sege says that Lycos will carry that concept forward even more as it develops a universal shopping cart that lets online customers shop throughout the entire network of sites while only performing one purchasing transaction.
Fifteen minutes into his presentation, however, the Sege wheels were shot off as he showed an infomercial-style video that, over a bed of peppy music, spent another 15 or so minutes cheerfully browbeating attendees by repeating in triplicate everything he had already discussed. At that point, several people began quietly filing out of the room.
No matter how many esteemed financial analysts praise the new company, some investors, symbolically speaking, are still heading for the door. While some suggest the recent stock-price woes may be just a case of Lycos, an overvalued company, coming back to Earth, you have to wonder how much investors believe in the USA/Lycos vision.
Perhaps, too, there is still bitterness toward Lycos CEO Bob Davis for allegedly misrepresenting the company's intentions to stay independent. Already at least one law firm, Milberg Weiss Bershad Hynes & Lerach LLP, has announced a class action lawsuit against Lycos for that very reason.
Still, Sege says the company is positive that shareholders will approve the merger. Also on the bright side, Lycos slightly beat Wall Street's predictions as it announced quarterly losses of $9.3 million on Thursday.
Investors sent Lycos shares up 2 1/2 to 93 in trading Thursday and, according to a report on TheStreet.com, the stock rose more--up 1 to 94--in after-hours trading.
Until a decision is put before Lycos shareholders, we can only expect its management to keep evangelizing. That awful video Sege showed on Thursday will likely get a lot of mileage.
Phil Harvey (pharvey@upside.com) writes for Upside Today. |
