Steve, Math isn't one of my favorite subjects, but I think I can answer this pretty well:
Suppose Company X (TMCS), Y (LCOS), Z (USAI's dogs, include HSN and Ticketmaster) propose a merger:
Prior to the merger, company X, Y are internet companies and enjoyed internet company valuation. Company Z isn't, and it's enjoying a media company's valuation.
Company X, Y combined for 500M in sales and it's growing at 100%+/year. The street values X and Y at 20-30 times of its revenue, just like any other internet company. So you have company X + Y worth 10-15 Billions.
Company Z has 1B in sales, and let's say it's growing at 20%/year. Suppose the street values them at 5 times of its revenue.
Now, what is X + Y + Z worth? Barry Diller said the combined company has 1.5B of revenue, thus, using internet valuation, it's worth 45B. But since X + Y grows faster, so I will give X 19% of the combined company (I will own 10.5% of this 19%), and I will give Y 30% of the combine company, my crap Z company will worth 51% of the new company. Is that a good deal for company X and Y?
Let's see, before the deal, X and Y combined worth about 10B, Z worth 5B. After the merger, Z will worth 51% of the combined company, X and Y will worth the other 49%. Is that a good deal? For company Z, it's a great deal, for company X and Y, it's bad.
Put it in simple turns, Barry Diller wants Lycos at a low premium. Since LCOS is an internet stock and has high valuation, the only way he can get LCOS at a low premium is by de-valuing his own internet holding TMCS at a low premium. We are a sacraficial lamp in this deal. Barry sold us short so he could max out his holding in the new combined company. That's why he did this. And as long as you let Barry to handle any merger deal involving TMCS, you are going to be screwed. That's how the street sees it.
Believe me, if not for Diller, this stock would have been in the 80s now. This is why this deal sucks horseshit.
So you're saying that now there's a new company that is composed of companies(TMCS,At home shopping,lycos) and because one of them is not an internet stock the street is evaluating the combination as a non-internet stock.
Also you're saying that if I sell you a company called x that makes x amount of dollars, and you combine it with a couple other companies, y and z that make consecutively y and z amount of dollars, which together you call the the xyz company, then you're saying that because I sold you company x(lycos) at such a low premium, company y(ticketmaster) is suddenly worth less, regardless of it's revenue,eps, p/e etc..
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