Lycos Takes 14% Stake in Commerce Applications Firm iComs

Lycos also says its online shopping destination posts a 450% rise in shoppers from year-ago levels.
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Updated from 8:00 a.m. EST

Lycos

(LCOS)

, the Internet media company that operates the Lycos Web portal, Monday took a 14% stake in closely held

Internet Commerce Services

, a provider of commerce applications services.

Cliff Conneighton, chief executive of iComs, disclosed that the deal is valued at just over $10 million. It is a combination of equity and a service agreement, though he would not provide a breakdown.

iComs' retail and business-to-business merchant customers will now have access to Lycos users when they sign up to join the Lycos shopping site,

LycoShop

. Lycos was the No. 4 digital media/Web property in the U.S. with 29.2 million users in November, according to

Media Metrix

, the Internet and digital media market-research firm. Lycos said Monday that the number of holiday shoppers at LycoShop rose 450% in 1999 from a year earlier.

iComs will also continue to provide operational support, merchant support and development services for LycoShop. That relationship began in May 1999.

This is the third round of funding for iComs, which was launched in 1997 with $2.3 million in start-up capital. Last May, the company, based in Nashua, N.H., received $10 million in its second round. A Lycos senior vice president, Jeff Bennett, will join the iComs board, expanding the board to six directors.

Lycos, based in Waltham, Mass., was up 1 3/16, or 1%, to 81 1/8 in Monday morning trading. (Lycos closed Monday up 5 5/8, or 7%, to 85 3/16.) Analyst David Zale of

Sands Brothers

said the surge likely had more to do with the strong market than the iComs deal. "There's been a lot of pent-up expectation about Y2K and now that's over, there are lots of people wanting to participate in the market," he commented. Zale rates Lycos a buy and his firm has done no underwriting for the company.

"This is a less-than-overwhelming move," said analyst Arthur Newman of

Schroder Securities

. "There are lots of larger companies out there playing venture capitalist. This is not unusual at all." He added that companies like Lycos will take small stakes in outfits they like, with an eye toward sharing in the upside as these start-ups become more successful.

In mid-December, Lycos announced it would buy up to 15% of

Fast Search & Transfer

, an Oslo-based Internet search technology provider.

America Online

(AOL)

has been known to take the same approach.

Newman rates Lycos an outperform and his firm hasn't done any underwriting for the company.

The LycoShop site "doesn't have the depth of

Yahoo!

(YHOO)

," said Newman, referring to the

Yahoo! Shopping site. He calls LycoShop "much more ambitious, though it needs more work," since LycoShop will compare prices for items between merchant partners and nonpartners alike, not just those retailers which have paid fees to be on the site. "It's a big chore to index the entire Web."

(AOL ended up Monday 6 3/4, or 9%, to 82 5/8, while Yahoo! finished up 42 3/16, or 10%, to 475.)