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Traders come down on Lycos

In spite of showing signs of reining in losses and beating analysts' estimates, Lycos sees its stock drop nearly five percent.

In spite of showing signs of reining in its quarterly losses and beating analysts' estimates when it reported its second-quarter results, search engine company Lycos (LCOS) today saw its stock drop nearly five percent.

Analysts said the drop may come from profit-taking in the stock, which rose 1-3/8 on the previous day. Lycos, which reported its results after the market's close, saw its shares fall as low as 20 in morning trading before closing at 20-1/2, down 1 point from yesterday's close.

Meanwhile, Paul Noglows, an analyst with Hambrecht & Quist, said he is raising his earnings estimate for fiscal 1997 to a loss of 49 cents a share from a loss of 53 cents. Revenues have been also revised to $21 million, up from $19 million for the same period, Noglows said.

Lycos yesterday reported a net loss of $2 million, or 15 cents a share, for the quarter ending January 31. Although the loss is up from $1 million or 9 cents a share a year ago, it marked the first time the company has reduced its losses over the past four consecutive quarters. Last quarter, Lycos reported a loss of $2.8 million, or 20 cents a share.

Reporting after the market's close, Lycos's stock rose 6.8 percent to close Monday at 21-1/2, up 1-3/8. It beat Wall Street's estimates of a loss of 17 cents a share.

Analysts applauded the company's performance. "They definitely had a strong quarter," said Noglows.

Lycos reported revenues of $5 million for the quarter, up fivefold from a year ago and a 37 percent increase over the previous quarter.

During the quarter, it also entered into two significant technology licensing partnerships as part of its effort to develop revenue streams other than its traditional fees from advertisers.

"We have furthered our goal of becoming a ubiquitous, branded media by complementing our advertising sales with the licensing of our technology into the major gateways of the Internet," said Edward M. Philip, Lycos's chief financial officer, in a statement.

"We are pleased with the growth during the quarter on both revenue fronts. This growth is evidenced by the 50 percent rise in the number of advertisers during the quarter to 300 advertisers, as well as the increase in our deferred revenue to nearly $9 million."

Warner Bros. will use Lycos's search engine technology for its CityWeb, an online Web network that will allow its member television stations to build better Web sites. Lycos also entered a deal with telephone company GTE, which will use the search technology in its SuperPages. This deal is expected to bring in a minimum of $10 million in revenues over the course of three years, Noglows added.

Lycos received 14 percent of its total revenues from these technology licensing agreements in the last quarter and saw that figure rise to 20 percent in the second quarter, he noted.

"I expect the company going forward to grow its licensee base and continue its aggressive international expansion," Noglows said.

He added that the company has yet to realize the 40 to 60 percent cut of the advertising revenues from these licensing agreements, and once it does, it will further add to its revenues.