Lycos E-Commerce Revenue Drives Q2 Earnings

Lycos, the popular Internet and e-commerce portal, (Nasdaq: LCOS) announced financial results for its second quarter, during which revenues reached $30.6 million (US$). These earnings represent an increase of 24% over the same period of the previous year, but an overall loss of $1.5 million. The loss was seen by investors as narrower than expected, and the Lycos stock price has remained steady, as of mid-day trading on Friday.

Lycos has been the focus of a great deal of media attention lately, prompted by the company’s decision to be acquired by USA Networks (Nasdaq: USAI). The deal would create an e-commerce powerhouse. In its financial announcement, Lycos focused almost exclusively on the USA Networks deal, and on a comprehensive e-commerce strategy.

According to Edward M. Philip, Lycos’ COO and CFO, “The ability to monetize our traffic growth through value-added advertising and commerce platforms is evidenced by our strong revenue growth.”

The combination of content delivery and e-commerce has become a goal of leading Internet players, including Lycos. Robert J. Davis, president and CEO of Lycos said, “As we offer our advertisers and commerce partners a one-stop shopping experience and superior targeting, we simultaneously offer users a diversity of programming and content.”

Lycos’ E-Commerce Moves

Lycos emphasized several e-commerce initiatives, including:

Launch of the Lycos Store, which opened in time for the 1998 holiday season and offers thousands of name-brand products that shoppers can purchase online directly from Lycos.

Joint announcement with Open Market of a revenue-sharing agreement to integrate Open Market’s e-commerce software into Lycos’ technical infrastructure.

Joint announcement with Bluefly.com, who sells brand name clothing at discount prices online, regarding a strategic alliance that establishes Bluefly as a premier commerce vendor of Lycos for both the 1998 and 1999 holiday seasons.

Launch of AuctionConnect, which enables Lycos online shoppers to search multiple auction sites for a particular product. Lycos received exclusive rights to Bidder’s Edge technology.

Selection of Bertelsmann Online as the exclusive bookseller for Lycos Europe in a three-year, $10 million (US$) agreement. The USA Network Deal

On February 9, 1999, the company announced the formation of USA/Lycos Interactive Networks, Inc., a three-way merger between Lycos, Ticketmaster – CitySearch Online and other USA Network properties, including the Home Shopping Network and First Auction. The combined entity will create an e-commerce operation reaching 70% of cable television households and nearly 50% of Internet users, while providing the infrastructure that currently fulfills 77,000 shipments per day. According to the company and many media analysts, these strengths, combined with the country’s leading local portal and pre-eminent ticketing service, will create one of the world’s leading interactive platforms.

Clouds Loom Over Lycos

However, the well-publicized stockholder jitters which took center stage after the announcement of the deal have caused CMGI, a 20% shareholder of Lycos, to reconsider the merger, although the deal is still considered to be currently on track.

In related news, the law firm of Milberg Weiss announced a class action lawsuit against Lycos on February 22. The lawsuit alleges that Lycos issued a “series of false statements,” which represented that Lycos was “committed to an independent strategy” when, in fact, Lycos was in serious and advanced discussions to merge with USA Networks, with Lycos shareholders constituting no more than 30 percent of the equity holders in the newly-formed entity. When Lycos announced that it had agreed to a transaction with USA, the price of Lycos dropped from $127.25 per share to $94.25 per share, a decline of 25% on extremely heavy trading volume.