Bob Davis, Lycos?s president and chief executive, passionately defended the company?s proposed merger with USA Networks subsidiary Ticketmaster Online-Citysearch (TMCS) on Friday.
The move follows the portal site provider?s announcement earlier this month that it would merge with TMCS to form USA/Lycos Interactive Networks. Lycos shareholders will receive a 30 per cent stake in the new company, while USA Networks will control 61.5 per cent.
But Lycos shareholders reacted badly to the deal, sending the stock price plummeting, and one key shareholder, CMGI, even hinted that it might decide to vote against the merger.
According to Davis, however, this was all due to a misunderstanding. "We didn?t do a good enough job explaining [the deal]," he said, arguing that the market "doesn?t fully appreciate" the non Internet assets that USA Networks brings to the table.
Davis, who will become president and chief executive of the merged company, pointed out that Lycos generated revenues of $56 million last year, while in contrast, the merged company would have had turned over $1.5 billion and made pretax profits of $165 million.
He also said that the merger of Lycos? and TMCS Web?s properties with USA Network?s Home Shopping Network (HSN) TV shopping channel, would create new opportunities for cross promotion and cross selling.
For example, Ticketmaster Online?s tickets could carry advertisements for the merged company?s various services, while USA Network?s TV networks could promote the Lycos portal.
But Davis rejected suggestions that the merger agreement might be amended to give unhappy Lycos shareholders better value for their stock. "I think we have a great deal for Lycos [shareholders] today," he maintained.
dDespite his spirited defence of the deal, however, analysts remained sceptical.
Barry Parr, IDC?s director of Internet and ecommerce strategy, said: "I think the marketplace is confused, and the market is pretty smart. I think it?s an interesting deal, but it doesn?t really solve the problems that [Lycos is] confronting as a portal. They have not really formulated a strategy on what the site is going to look like."
He acknowledged that Lycos would benefit from USA?s backend infrastructure, but said this did not justify giving away 70 per cent of the company.
The market did not react well to the Lycos pep talk either. Shares closed down almost six per cent on Friday at $87.63 compared with $140 per share before the merger talks.
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