CNet (CNET) - Get Report and EarthLink (ELNK) may be in play. But they may not be as playful as investors hope.

Both stocks rose Thursday afternoon in the wake of a


report, citing unnamed sources, that international Internet conglomerate

Terra Lycos


was in acquisition discussions with Internet service provider EarthLink and technology news and information provider CNet. A deal could be announced by the end of the summer, according to the


report. Spokespeople for EarthLink and CNet declined to comment. A Terra Lycos spokeswoman couldn't be reached.

Although a merger with these companies might be plausible, both putative targets likely would play hard to get, says one buy-side analyst, pushing up the price of any deal. Further muddying the waters, Terra Lycos would likely have to pay cash, considering the 80%-plus drop in its shares over the past year, the analyst says.

In Thursday trading, CNet shares rose 90 cents, or 7.7%, to $12.57, and EarthLink shares dropped 3 cents to $12.70. Terra Lycos American depositary shares fell 20 cents to $8.47.


At first glance, the credibility of the report is stretched by the disparity of the companies named as acquisition targets. To say that Terra Lycos is interested in purchasing either a provider of Internet connections or a property devoted to tech news covers the bases pretty broadly, like a child announcing he can't decide between buying a pet mouse or a pet alligator.

But, in fact, Terra Lycos' business already includes both Internet access and editorial content such as the


portal and financial news site


"I guess I could see why they're interested in both," says the buy-side Internet analyst, who spoke on condition of anonymity. The analyst's firm doesn't own Terra Lycos, CNet or EarthLink.

One sell-side analyst who asked not to be identified says a Terra Lycos acquisition of EarthLink has been rumored for months. Such a deal would make more sense than a deal to buy CNet, because Terra Lycos needs to broaden its Internet access business. "You have to own your customers," says the analyst. A CNet deal "really won't solve Terra Lycos' problems," the analyst adds.


A major sticking point of any deal, though, would be that CNet or EarthLink probably would not want to take Terra Lycos stock in payment, the buy-side analyst said. The buy-sider pointed to several factors, including the limited float of the stock and the short interest in Terra Lycos. "You're getting a pretty illiquid stock," says the analyst. "I would not be happy with it."

As of March 31, Terra Lycos reported having the equivalent of $2.2 billion in cash on hand. The

market capitalizations of EarthLink and CNet are each around $1.7 billion.