Services & Software

The week in review: Lycos sells, again

A well-heeled Spanish ISP agrees to buy Lycos in a stock deal worth $12.5 billion, about a year after the portal's proposed merger with USA Networks ran aground.

A well-heeled Spanish ISP agreed to buy Lycos in a stock deal worth $12.5 billion, about a year after the portal's proposed merger with USA Networks ran aground.

Reviving Lycos' aspirations of becoming a world-class Internet enterprise, Terra Networks' buyout offer was accompanied by European media giant Bertelsmann's commitment to purchase $1 billion in advertising and services in a five-year period. Terra Lycos, which will have operations on four continents and in 37 countries, combines two companies that lost some $209 million on sales of $214 million last year.

Back on track?
The sale of the Internet's No. 5 property, according to Nielsen/NetRatings April audience measurements, would mark the first time a prominent American dot-com has been purchased by a foreign-based firm. The task of integrating different business cultures could be daunting: Terra Networks is seen as a more button-down outfit, two-thirds owned by Spain's phone giant, Telefonica.

The proposal values Lycos at $97.55 a share, a 67 percent premium to Friday's closing price of $58.13. The stock climbed above 72 from 54 as the negotiations became known, but fell back again after financial analysts downgraded their recommendations, worrying about culture clashes.

The deal itself came together quickly and with little fanfare. Formal discussions began just a few weeks ago.

Should it go through, the agreement would certainly be a victory for Lycos chief executive Bob Davis, who will occupy the same post for the new company, which will be based out of Waltham, Mass. Seen as a quietly diligent leader, the 43-year-old would not only put the USA Networks failure behind him but also gain 1.9 million vested Lycos options upon the deal's closing.

In related news, Lycos reported quarterly earnings Thursday of 7 cents a share, excluding extraordinary gains and other one-time items, surpassing expectations by 2 cents.

Coming right up
Hewlett-Packard, SGI and Red Hat boosted efforts to develop Linux for Intel's forthcoming Itanium processor. Developing applications for the new chip is difficult because there are so few Itanium prototype computers to go around; Linux is still too new to be suitable for most high-end applications.

VA Linux introduced two low-end servers and said it intends to steal market share for more expensive systems away from Sun Microsystems. The latter admitted last month that it's feeling the effects of Linux competitors in its low-end computer business. However, Sun rolled up $4 billion in revenue last quarter and holds a dominant position in the Unix server business, while VA logged revenues of $20 million in its most recent three-month period.

Transmeta's Crusoe chip will likely debut in notebook computers or "Webpad"-style Internet appliances next month. The much-anticipated processors incorporate software to reduce power consumption as well as "code-morphing" software that allows the chips to emulate Intel products without some of the performance penalty traditionally associated with "emulation."

Advanced Micro Devices also will release a consumer PC processor in June. Initially running at 600 MHz, 650 MHz and 700 MHz, the Duron will fall into the low-price range despite its fairly large architecture. The larger the chip, the more it costs to make and the less likely computer makers will be excited about adopting it. Intel will counter with new Celerons later in the month.

SGI released two new Intel-based workstations for the first time since two ambitious new models flopped in 1999. SGI has been in the midst of years of restructuring, most recently delaying the launch of a new processor. Also this week, the company said its chief financial officer has and a senior vice president have departed. CFO Betsy Rafael's exit comes after only five months on the job.

Rap artist Dr. Dre followed rock band Metallica in providing Napster a list of individuals who allegedly participated in online piracy, asking for the individuals to be blocked from the MP3-swapping service. Close to 30,000 of the more than 300,000 who were barred as a result of Metallica's action are appealing the ban.

Antivirus firms were monitoring a new virus with the potential to cause more damage than its recent predecessor, the "Love bug." The virus, borne by email attachment, alters itself to sneak around traditional virus scanners, but has not been spreading as quickly.

A initiative extending its "name-your-own-price" program to gasoline may be undermined by a lack of interest from oil companies. ExxonMobil, Chevron, Sunoco and Venezuela's Citgo said they chose not to sign on, casting doubt on whether Priceline will be able to save drivers money.

Intel passed Cisco in terms of market capitalization, not long after the networking giant had overtaken both the chipmaker and long-time tech-industry leader Microsoft. The turnabout seems to upend conventional wisdom that networking equipment had overtaken processors as key hardware elements for the so-called new economy. In a related matter, Intel announced it will split its shares 2-for-1.

British e-tailer ran out of money, becoming Europe's first big dot-com failure just six months after its launch. Separately, the Digital Entertainment Network told its staff of 150 it can no longer pay them. Many have predicted that Internet companies will start to disappear at an accelerated pace because of the recent stock market malaise and declining interest in e-commerce businesses.

Corel and programming toolmaker Inprise called off a proposed billion-dollar merger, leaving Corel to find other forms of financing. Corel offered to buy the former Borland in February, but the agreement failed as Corel's stock price plummeted. The company's plans to capitalize of Linux have not yet borne fruit.

Hewlett-Packard shares slid after reporting net income a nickel a share ahead of estimates. The company hopes to increase profitability by selling more PCs directly to customers instead of through third parties, a sales method employed most successfully by Dell and Gateway. Currently, 14 percent of HP's PCs are sold directly. Notebook revenue grew 180 percent, and home PC revenue grew 85 percent over the same period last year. HP recently surpassed Dell as the fastest-growing big PC maker.

Also of note
Apple Computer's new OS X operating system will be delayed until January 2001 ... Microsoft's browser bug team is working to patch an Internet Explorer glitch that afflicts Apple Macintosh computers running the latest iteration of IE ? AT&T Wireless announced free mobile phone-based Internet access when customers purchase one of two phone models, escalating the emerging battle for wireless Net access customers ? The government derided Microsoft's proposal to keep the company intact while accepting restrictions on its business practices, saying it would not prevent the company from abusing its monopoly.