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Lycos defends USA Networks deal

CEO Bob Davis toes the company line on why the acquisition will help create a "next-generation" Internet company amid criticism and shareholder suits.

A day after beating Wall Street earnings expectations, Lycos chief executive Bob Davis today defended his company's pending acquisition by USA Networks.

The conference in New York was Davis's first public explanation of the move and the goals the two firms have for making the new venture--to be called USA/Lycos Interactive Networks after the merger closes--what he called a "next-generation" Internet company. However, the concepts he outlined have been reported and picked over in the weeks since the deal was announced.

Also, Davis's speech mirrored yesterday's presentation by Lycos executive vice president Ron Sege at the BancBoston Robertson Stephens Tech '99 Conference in San Francisco.

The new venture will use USA Networks' various television properties, such as the Home Shopping Network, to drive traffic to the myriad online properties within Lycos's network of Web sites, as well as Ticketmaster-CitySearch.

Davis also focused on infrastructure during his speech, noting that the company plans to leverage a 50 percent Web audience reach and a 70 percent television viewing reach in an effort to convert television viewers into online shoppers and eventually into Web auctioneers. Davis added that the venture's commerce activity would be supported by an existing 20 million credit card account database, the capacity to handle 100 million telephone calls per year, and the ability to ship millions of packages per month.

"We all believe in the scope and magnitude of commerce on the Web," Davis said. "If you sit back and ask yourself what other company in America--in the world--than this new entity [will] become a leading e-commerce player out there? I can't think of one."

Davis added that he will keep his post as chief executive in the new firm and Ted Philip will stay on as chief financial officer.

Barry Diller 's USA Networks is in the process of acquiring Lycos in an $18 billion deal. Upon the closing of the transaction, USA Networks will own 61.5 percent, Lycos shareholders will own 30 percent, and Ticketmaster Online-CitySearch shareholders other than USA Networks will own 8.5 percent. Diller will become chairman of the new company.

However, roadblocks have formed en route to shareholder approval of the deal. Since announcing the intent to merge, Lycos's stock price has taken a beating due to investor concerns that USA did not pay Lycos an adequate premium for its stake. Two days after the deal, one of Lycos's primary investors, CMGI, said it would not vote in favor of the deal if the stock continued its downswing.

Davis, however, remained confident. "My is belief that CMGI will vote for the deal," he said today.

Adding salt to the wound, Lycos Monday was slapped with a shareholder lawsuit, alleging that company executives made misleading statements about Lycos's strategic future.

The company also faces a shareholder lawsuit in its acquisition of Wired Digital, where founder shareholders are trying to block the transaction. Davis today said he was "wholeheartedly committed" to completing the acquisition of Wired Digital, in response to rumors that Lycos was losing interest due to the stockholder squabble. Davis added that the deal is expected to close within 30 days.

For the past year, Lycos has focused on acquiring companies for reach on the Web. During this period, the company vaulted into one of the most visited sites on the Web after acquiring sites such as Tripod, WhoWhere, and Angelfire.

There will be no layoffs and the headquarters of the new company will be in Massachusetts, Davis said.