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Lycos CEO: Let&#039s talk takeover in fall

Lycos Inc. (Nasdaq: LCOS) CEO Bob Davis said Wednesday he misjudged the market's reaction to the proposed USA Networks merger, but hinted that the company could in play again in the fall.

USA Networks officially gave up on Lycos this morning, but the two companies are still doing a cross-marketing deal with Ticketmaster-CitySearch (Nasdaq: TMCS) in the mix.

For now Lycos is moving on and that means the inevitable takeover talk. In October, Lycos becomes "poolable."

"We will become poolable beginning in the early fall," said Davis on a conference call with analysts. "And as long as its allowed that will be an advantage for us."

Pooling-of-interest accounting, which is under fire by accounting groups, allows companies to combine results like they've been together the whole time without any hit to future earnings. The bottom line is that Lycos can merge with a company in the fall and not dent the buyer's future earnings.

Because of pooling, analysts are expecting Lycos to be bought by the end of 1999.

The AOL-Netscape and Yahoo-Geocities/ would have been a lot more costly without pooling-of-interests accounting. In fact, the Yahoo-Geocities merger was completed just days after the community company was eligible for pooling.

Lycos isn't currently eligible for pooling accounting because CMGi Inc. (Nasdaq: CMGI) owned half of the portal. When a company owns a majority of a company and spins it off or takes it public, there's a two-year waiting period before "pooling" kicks in.

Davis said aside from being a takeover target, Lycos will be looking at other acquisitions to build its e-commerce infrastructure. "We will have a smart M&A (merger and acquisition) strategy that will improve the top and bottom lines," he said.

Calling the USA-Lycos merger flap a "learning experience," Davis said any future deals with Lycos will be simple, easy to understand deals for the market.

On other topics, Davis shot down reports that daytraders held about 60 percent of Lycos shares. Davis said the correct figure is about 30 percent. Institutions hold about 40 percent to 45 percent of Lycos' shares with CMGi owning about 18 percent.

Davis also reiterated that Lycos will post strong results next Tuesday.>