SAN FRANCISCO -- Lycos (LCOS) may become the latest plume in the NBC peacock. According to a report on the The Industry Standard's Web site tonight, NBC is close to buying a stake in Lycos that will "probably" be around 35%.
NBC, a unit of
, would pay for the stake in cash and promotional time on NBC channels, the
said, citing sources at NBC and in the Internet industry. The deal could mean that Lycos would also merge with the
portal created by
and in which NBC holds a 60% stake.
A Snap spokesperson said the company does not comment on rumors. NBC spokespeople could not be reached for comment.
Big media companies, having largely failed to create their own successful Web sites, have taken to investing in pricey portal startups.
triggered the trend when it bought a minority stake in
in a convoluted deal last year. NBC followed soon with its stake in Snap.
But with investors giving massive valuations to any company that demonstrates even a hint of a strategy to capitalize on the Internet, NBC and others are growing even more intrigued with the potential of the new medium.
Jack Welch, the chairman of General Electric, told analysts in December that GE is considering a partial spinoff of its Internet assets, which include stakes in CNet and Snap. That would give GE a new, rich currency to use for future acquisitions of Internet companies.
Lycos' market cap as of the market close stood at $5.56 billion, making a 35% stake in the company worth nearly $2 billion. In recent weeks, acquisitions involving Internet portals that have been announced -- such as
-- have come at prices nearly double the market cap of the acquired companies. Both of those deals were financed with stock, not cash.
In the wake of those deals, Lycos' name has often been mentioned as the next likely candidate for a takeover. Besides Yahoo!, it's the last portal without a large investment or an acquisition by a larger company, although
is said to be mulling a spinoff of its
portal. Rumors of a possible takeover of Lycos have included suitors such as
, Disney (which owns the ABC Network) and NBC. Such rumors have helped push Lycos' stock up 132% in 1999.
"It's very hard to figure out," says Bruce Smith, an analyst with
. "If this deal happens, it's going to make the Disney deal seem simple, unless they use cash."
-- Alex Berenson and Spencer E. Ante contributed to this report.