Goldman Sachs Conference: Lycos CEO Stays Cool

Attempting to clear up any confusion about his merger with USA Networks (USAI), Lycos (LCOS) CEO Robert Davis gave a quick presentation at the Goldman Sachs Technology Investment Symposium.

Davis stressed that the new company has as good a chance as anyone to become "the dominant e-commerce vendor in the world in a very short time." The stock market gave the deal a thumbs down, sending Lycos shares tumbling 33, or 26%, to 94 1/4.

In his presentation, Davis spent a lot of time talking about those assets. In particular, Home Shopping Network, a company that is present in 70% of cable households, has 2,000 telemarketers and is capable of shipping 200,000 items a day. To survive in a world of low margin or even no margin or negative margin e-commerce, the ability to operate on such a large scale is crucial, Davis said.

Davis also talked about synergies, for example, printing a company's Web address on some of the 70 million tickets that TicketMaster (TMCS) sells annually, or having HSN telemarketers pitch a company's products to customers already on the phone buying something else.

He admitted he'd had a tough time explaining the deal to investors, as evidenced by Lycos' big drop today. From the dialogue in the question-and-answer session following Davis' presentation, it was indeed clear that people had a hard time following the transaction, which is expected to close in four to six months.

Partly to blame for the confusion were the stock warrants to be granted to Lycos shareholders that could increase their holdings under a certain set of circumstances following the deal; people also came up with different numbers for the proper value of USA Networks' market cap. But he recalled that Lycos's share price has dipped each time the company has announced an acquisition of late. In other words, today's big drop wasn't a new experience for him. "Today's challenge is that it takes time to tell the story," Davis said.

Edison Chu, vice president of New York-based Digital Century, said that he thought TicketMaster and Home Shopping Network were impressive operations for an online company to gain. "It would be very difficult for another company to emulate," he said. "Those were assets that were really unmatched." (Digital Technology does not have any holdings in the companies involved in this deal, he said.)

But, Chu said, the challenge for USA/Lycos would be to integrate all the different brands. "I see potential problems of them bringing the assets all together," he said, estimating it would take more than a year after the deal closes. "My sense is, it's going to take a lot of time," he said.

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