Lycos Touts E-Commerce Revenue
With its USA Networks deal on the line, Lycos is trying to sway skeptical investors with promises of rich e-commerce revenue.
In a conference call with Wall Street analysts after its better-than-expected earnings Thursday, Lycos (LCOS) chief executive Davis said that it will get access to 20 million credit card holders as part of its deal with USA Networks (USAI) Home Shopping Network. The card members will give Lycos the ability to directly target the consumer and generate "traditional transaction revenue" by the holiday season, he said.
The meeting came as Lycos reported a narrower-than-expected pre-charge loss of 3 cents a share for the fiscal second quarter as revenue grew by 24 percent.
Lycos will no doubt echo the same e-commerce themes when it holds a press conference on Friday.
It's a crucial time for Lycos (LCOS), which needs its stock price to rise significantly to ensure the backing of large shareholder CMGI (CMGI) for the USA Networks (USAI). When asked whether CMGI would back the deal, Davis said he was "confident" the deal would receive their support.
Lycos, which operates the Web's second-largest search engine, released its quarterly results on the same day a law firm representing unidentified shareholders filed suit against Lycos and its chief executive, Bob Davis, in an attempt to block Lycos' merger with USA Networks.
Earlier this month, Lycos announced its plan to combine with USA Networks and Ticketmaster Online-CitySearch in a deal that initially met with investor skepticism. The combined companies would reach TV sets in about 70 percent of U.S. households and nearly 50 percent of all Internet users.
Lycos' sales in the second quarter grew to $30.6 million, up from $12.6 million in the year-ago period and $24.7 in the first quarter. Ad sales increased 117 percent from the year-ago period to $20.9 million, while revenue from e-commerce, licensing and other sources more than tripled to $9.7 million.
The 3-cent second-quarter loss came in a penny above the Wall Street consensus estimate compiled by First Call. Including merger-related charges, the company lost 22 cents for the quarter.
"The ability to monetize our traffic growth through value-added advertising and commerce platforms is evidenced by our strong revenue growth. In addition, we continue to greatly improve both our product and our bottom line," said Edward Philip, chief financial officer.
The stock's rise came despite the fact that Schiffrin & Barroway of Bala Cynwyd, Pa., filed a class-action suit "on behalf of all purchasers of the common stock of Lycos" from Jan. 25 through Feb. 9, the firm said in a press release. The law firm's release made no mention of specific shareholders.
The suit accuses Lycos and Davis "of falsely representing that Lycos was committed to an independent strategy" when "the company was in serious and advanced discussions to merge with USA Networks."
LycoExecutive Vice President Ron Sege played down the lawsuit at the BancBoston Robertson Stephens conference in San Francisco on Thursday. The company is "exceedingly confident" it will get the necessary shareholder votes to approve the merger, he said. "We don't anticipate any issues."
On Feb. 9, when Lycos and USA Networks announced the deal, shares of Lycos dropped from $127.25 per share to $94.25 per share. The class action seeks to recoup losses from the drop.
The Massachusetts-based company plans a press conference Friday in New York City to tout the USA Networks deal, which also involves USA Networks unit Ticketmaster Online-CitySearch (TMCS).
Written By Bambi Francisco and Darren Chervitz, CBS MarketWatch