Dow Jones Newswires -- March 12, 1999
Tech Stks-2:Investors Take Profits On Internet Stocks>LCOS
Internet stocks are also down sharply with the broader market Friday as investors take profits on gains from earlier in the week.
William Blair analyst Abhishek Gami said concerns over the proposed three-way transaction among Lycos Inc. (LCOS), USA Networks Inc. (USAI) and Ticketmaster Online Citysearch Inc. (TMCS) are hanging over the sector.
Lycos' shares have tumbled 20% since the companies last month announced a deal for Lycos to merge with Ticketmaster Online, which USA Networks controls, and USA Networks' electronic shopping assets, including the Home Shopping Network, to form a new company called USA/Lycos Interactive Networks Inc.
Many investors feel Lycos, which would initially get a 30% stake in the new company, is not getting a fair deal.
David Wetherell, chairman and chief executive of CMGI Inc. (CMGI), which owns about 20% of Lycos, resigned from Lycos' board of directors earlier this week to protest the deal and to seek other options for Lycos.
But Gami noted that Lycos and USA Networks appear to be digging in their heels to make sure the transaction goes through. "USA Networks has a lot to lose (if the deal doesn't go through) because this is their big entre into the Internet," Gami said. "If USA Networks is in fact set on being a big player on the Internet, they need Lycos."
He added that if the deal does go through, it would put a lot of pressure on competing portal companies like Yahoo! Inc. (YHOO) to beef up their electronic commerce operations since USA/Lycos Interactive Networks would be a giant in online retailing.
Lycos shares were recently down 7 5/8, or 7%, at 101 3/8. Ticketmaster Online shares were down 1 5/16, or 3.5%, at 37 3/4. And CMGI shares were down 18 1/8, or 10%, at 164.
Gami said CNET Inc. (CNET) shares are also dragging the Internet stocks lower Friday after the company's chief executive, Halsey Minor, told CNBC Thursday that the company is likely to remain independent. CNET's shares have doubled over the past month - hitting a high of 123 3/8 Tuesday after a 2-for-1 stock split - at least in part on takeover speculation.
CNET's shares were recently down 8, or 8.3%, at 87 13/16.
Also hanging over the Internet stocks Friday are questions about whether the group is headed for a seasonal slowdown, Gami said. Many analysts were expecting traffic and Web usage, as well as advertising and commerce spending, to lag in January after the holidays drove robust growth in the fourth quarter.
But most Web companies have indicated that traffic remained strong through January, leaving many investors wondering if there will in fact be a slowdown.
Gami said the summer could bring a seasonal slowing since Internet usage tends to trail off in warmer weather and since the technology industry in general tends to slow down in the summer.
Among other Web stocks Friday, Yahoo was down 6 1/4, or 3.5%, at 172 3/4. Amazon.com Inc. (AMZN) was down 4 3/8, or 3.2%, at 130 1/2. eBay Inc. (EBAY) was down 9, or 6%, at 141. And Onsale Inc. (ONSL) was down 3 3/8, or 8.4%, at 36 7/8.
Finally, InfoSpace.com Inc. (INSP) was down 8 1/2, or 11.1%, at 68 1/4, following a 9.6% drop Thursday after the company announced plans for a secondary offering.
- By Maria V. Georgianis; 201-938-5244; and
Joelle Tessler; 201-938-5285
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