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Terra considers 'alternatives' for Lycos

The Spanish Internet company says it is exploring various options for the operating units of its U.S. arm.

Spanish Internet company Terra Networks on Thursday acknowledged it is considering "different alternatives" for its Lycos division, according to a U.S. regulatory filing.

As first reported by CNET, the Madrid, Spain-based Internet company has retained investment bank Lehman Brothers to explore a sale of its Lycos operations in the United States. For the past few weeks, bankers have distributed copies of a document to potential suitors outlining a business case for acquiring Lycos.

In a statement, the company said it is "currently involved in a reviewing and analyzing process on some of its operating units. As part of this global process, different alternatives are being analyzed for Lycos U.S. No definitive decision has been adopted so far."

Although no purchase price was listed in the Lehman document, Terra is looking to sell Lycos for $200 million, according to one source familiar with the offer.

Purchasing Lycos would also mean acquiring its numerous "vertical" properties such as financial site, personals service, Wired News and Web hosting services Angelfire and Tripod. Lycos also has jumped on the lucrative commercial search business stemming from its relationship with Google.

Lycos generated $98 million in revenue during 2003.

Terra acquired Lycos in 2000 for $12.5 billion in a deal that touted the marriage of Internet access and Web content. But soon after the merger, the company was crippled along with its peers during the dot-com collapse. That hardship was further exacerbated when German media giant Bertelsmann renegotiated the remaining $675 million of a $1 billion advertising commitment it made as part of the Terra-Lycos merger.