NEW YORK -- Lycos officials on Tuesday defended a planned merger with USA Networks' Home Shopping Network and Ticketmaster Online-CitySearch, saying the move would create an electronic commerce powerhouse.
Lycos CEO Bob Davis and his chief financial officer, Ted Philip, told an audience of professional money managers attending the annual Goldman Sachs Technology Symposium that Tuesday's 25 percent drop in the price of Lycos stock showed the deal was misunderstood.
The combined companies would have revenues of US$1.5 billion, strong cash flow, and live up to other traditional measures of major media companies, Davis said, adding it offered "all of the excitement of the Internet combined with substantial earnings ... and cash flow."
Still, shares of Lycos (LCOS) plunged 26 percent on Tuesday to $94.25. In early Wednesday trading, Lycos was down $11.25 to $83.
At least four investment banks expressed their displeasure with the deal. Analysts at CS First Boston, BT Alex. Brown, Oppenheimer, and Volpe Brown Whelan downgraded Lycos stock.
"This will be seen as a defining moment" for Internet companies, Davis predicted.
But several professional money managers in the Goldman audience expressed bafflement at the deal's complexities, and at least one said she feared Lycos had been out-negotiated by master dealmaker Barry Diller, the chairman of USA Networks.
Davis fended off the criticism, saying some investors appeared to have mistakenly equated Lycos' pre-deal market capitalization of about $6 billion with the market value of USA Networks by failing to include the 40 percent stake held by Seagram and Liberty Communications.
USA Networks' own market capitalization was about $13.5 billion compared to Lycos' $6 billion, or roughly commensurate with the terms of the deal, he said. Another $10 billion for the value of Lycos and Ticketmaster Online makes the new company worth well in excess of $20 billion, he said.
