Investors just don't like this




USA Networks

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That was readily apparent when Lycos shares dropped 30% Feb. 9, the day the Internet firm disclosed its plans to merge with Barry Diller's USA Networks and his

Ticketmaster Online-citysearch


. Investors griped about their puny stake in the combined entity and wondered how the firms would fit together.

It was confirmed when, two days after the deal was announced, Lycos shares mounted a comeback as the company's largest shareholder,



, said it would have to wait and see to decide whether it liked the matchup.

And stockholders' immense distaste for the deal was confirmed today when founding Lycos board member quit to fight the deal, resulting in Lycos stock's first significant bounce since CMGI dithered Feb. 11.

Now, CMGI Chairman and CEO David Wetherell says fellow Lycos shareholders are already praising his decision to quit Lycos' board. Wetherell said leaving the board is part of CMGI's effort as Lycos' largest shareholder to get a better price for its stake.

"There has been some contact from shareholders," Wetherell told

this morning. He characterized the contact as "largely very supportive," but he wouldn't identify the other shareholders or specify how much of an ownership stake they represented. Lycos said it stands by the deal.

Meanwhile, another blow to the merger came courtesy of

Credit Suisse First Boston

Internet analyst Lise Buyer, who issued a report Tuesday saying that the odds of the deal closing as currently structured "are now well less than 50/50."

Lycos shares were up 11 15/32, or 14%, at 95 11/32 Tuesday. They dropped from 127 1/4 before the USA deal was unveiled Feb. 9 to trade in the mid-80's this month. Meanwhile, CMGI, which owns nearly 22% of Lycos, according to a filing with the

Securities and Exchange Commission

from last month, was up 3 to 203 1/2 after leaping 47 1/2, or 31%, yesterday.

Wetherell said the CMGI board hired

Morgan Stanley

a couple weeks ago to assist in finding alternatives to the merger, but that he himself had not had any contact with Morgan Stanley because of his presence on the Lycos board.

Wetherell said he would agree to the deal creating

USA/Lycos Interactive Networks

if there were "a fundamental change in the number of shares the Lycos shareholders received in the combined entity." Depending on the price of USA/Lycos in the years following the deal's expected close, somewhere between 30% and 35% of the new entity will end up in the hands of current Lycos shareholders. Wetherell wouldn't specify what percentage of USA/Lycos would be more appropriate.

CSFB's Buyer, who has a hold rating on the stock, advised Lycos shareholders to stand pat "and wait to see if either 1) USA Networks restructures the deal, something they have publicly stated they will not do, or 2) the deal falls apart, which would likely lead to market speculation about other potential suitors." CSFB did underwriting for Lycos prior to Buyer's arrival at the firm, her office said.

Wetherell said Lycos could remain independent, and he didn't disagree that it might be a candidate for merging with other companies, though he declined to comment on which firms might be appropriate. USA Networks declined to comment. CEO Barry Diller said earlier this month that the deal would not be renegotiated. A Lycos spokesman declined to comment, though Lycos said in a statement "it remains fully committed to the USA/Lycos Interactive Networks transaction, which will create a next-generation Internet company with significant revenue and cash flow."

One fund manager, however, wasn't sure that there would be alternatives. "I think the likely outcome will be that the transaction will be approved, but this may make it more difficult," said Ryan Jacob, portfolio manager of the

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Internet Fund. The fund has shares in CMGI, but sold its Lycos holdings after the USA/Lycos transaction was announced. "Will the terms change?" asked Jacob. "I'd be very surprised. Unless it was absolutely clear that the transaction was in jeopardy, and even then given USA's stubbornness, I doubt it."

The current share price, Wetherell said, grossly undervalues Lycos given its vast reach -- measured by how many Internet users visit the site at least once a month. According to the latest figures from

Media Metrix

, Lycos' sites had the fourth-largest reach among Internet users. But, Wetherell said, companies with a similar reach, such as





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America Online


, have much higher market valuations. (Microsoft, of course, has a few assets going for it other than its MSN group of Web sites, and AOL has the benefit of 16 million paying subscribers worldwide.) "It's our opinion that Lycos is worth a lot more than it is today given its reach and given its growth rate," Wetherell said.

What's next? Wetherell said he has no timetable on how long his efforts to increase the value of his Lycos stock will take. "I just got to the point where I can consider alternatives," he said.