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THE DAY AHEAD: Is Lycos an e-commerce play?

Tech Industry

Maybe Lycos Inc. (Nasdaq: LCOS) didn't need that USA Networks Inc. merger to become an e-commerce player after all.

The logic behind the USA-Lycos merger was based on the theory that Lycos would morph into a part portal, part e-tailing cash cow. But just because the USA-Lycos marriage is off doesn't mean the portal hasn't been making headway in the e-commerce area.



Lycos: E-commerce play?



In Lycos' fourth quarter, the company reported stronger-than-expected sales of $45.1 million and a profit of a penny a share. About 30 percent of Lycos' revenue came from e-commerce. Indeed, advertising accounts for the bulk of Lycos' revenue, but according to company officials the future -- or half of its revenue -- lies in e-commerce.

Because of that e-commerce push and ability to "monetize" its page views and 32.4 million registered users, CEO Robert Davis reckons Lycos can remain one of the rare Internet companies that consistently report profits. "We are very committed to profitability moving forward," said Davis on a conference call. "We fully believe it is sustainable."

Davis added that Lycos has big plans to boost revenue by becoming a commerce aggregator just as it has been a content aggregator.

Keep in mind that the aggregation game is different than the actually selling of products. Some analysts suggest Lycos' middleman status isn't truly e-commerce. Some analysts said that while Amazon.com Inc. (Nasdaq: AMZN) loses lots of cash it still controls its own e-commerce destiny. Companies like Lycos can't.

But that could be overanalyzing things a bit. If Lycos is viewed as an e-commerce play shares could be off to the races.

The first initiative for Lycos is its Lycos Merchant Center, which gives small businesses the tools to build storefronts. Similar to free home page building tools, Lycos will offer offline businesses tools for real-time credit card processing services, and integrated order management and payment processing applications. According to its pricing list, Lycos will get transaction fees, revenue sharing and hosting fees. The portal will also get a traffic boost as users surf and shop.

Lycos said it expects to have "several 100s" of stores up and running on its platform by September with plenty of time to spare before the holiday rush. "There is a lot of incremental revenue here. The Lycos e-market is virtually non-existent now," said Davis. "We have lofty goals for 2000."

Lycos watchers, which still harbor concerns about the company's brand relative to Yahoo! Inc., are impressed with the company's e-commerce initiatives. Analysts bumped up Lycos revenue targets for fiscal 2000 to the $230 million range. Merrill Lynch analyst Henry Blodget included Lycos on his must-have list of Internet stocks for the holidays.

" Lycos is in the process of integrating many of the pieces and platforms it has quietly assembled that could provide it a robust, and unique e-commerce initiative," said James Preissler, a PaineWebber analyst that upgraded Lycos to "buy." "We believe Lycos' e-commerce product positions the company well in advance of the holiday shopping season and the excitement surrounding the e-commerce stocks."

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