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Terra Lycos trims staff on revenue drop

The Spanish Internet company says it will cut 15 percent of its workers after quarterly revenue falls short of Wall Street expectations.

Spanish Internet company Terra Lycos said Tuesday that it would cut 15 percent of its workers in an effort to trim costs after quarterly revenue fell short of Wall Street expectations.

Terra Lycos posted revenue of $164 million (178 million euros) for the first quarter, ended March 31. Although that figure is up 60 percent from year-ago comparable results, it's off the $177.30 million analysts were looking for, according to First Call.

It's also about 6 percent below fourth-quarter revenue, the company said.

Terra Lycos was formed last year, when Spain's Terra Networks acquired U.S. company Lycos in a $4.6 billion deal. It operates in 42 countries, offering Internet access and portal services.

The job cuts are part of an "assessment of (the company's) organization and operations in order to leverage synergies derived from the merger," the company said in a release Tuesday.

But like most Internet companies, Terra Lycos has suffered with the decline in online-advertising spending. Executive Chairman Joaquim Agut predicted last month that the company would pull in revenue of $174 million in the first quarter and break even on an operating basis by the end of the year.

Terra Lycos reported a net loss of about $154 million, about two-thirds of which was goodwill amortization related to acquisitions.

The company lost about $67.4 million before accounting for interest, taxes, depreciation and amortization, known as EBITDA. That's actually a slight improvement over the fourth-quarter's EBITDA loss, the company said.

Its media business accounted for 69 percent of total revenue, with the remainder coming from access fees. As of March 31, it had 98 million registered members, up 47 million from a year ago and 15 percent from last quarter. The number of access subscribers grew 15 percent from the fourth quarter, to more than 7 million, roughly 4.5 million of whom were in Spain and Latin America.

The company has been scrambling amid a slowing economy in the United States and Latin America. It has seen significant management upheaval, including the departure of former Lycos chief Bob Davis in February.

Tuesday's results were a mixed bag; while revenues dipped, operating losses slowed, and cost controls appear to be working, analysts said.

"Obviously top-line growth was disappointing, but they've done a good job at cutting costs," said Jesus Gomez, an analyst at Banco Santander Central Hispano in Madrid. "Now the most important thing is to know the company's guidance for the full year."

The company is predicting revenue of $900 million for the full year but will speak to analysts Wednesday.

Merrill Lynch analyst Peter Bradshaw noted Tuesday that the revenue drop was "not a bad result, in our view, given the tough operating environment." He maintained a "neutral" rating on the stock.

"We have always believed that the new CEO would be able to cut down on costs, and the evidence is now before us," he wrote.

Reuters contributed to this report.