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Lycos, USA explain deal
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February 9, 1999: 2:38 p.m. ET
CEOs Davis and Diller offer insight into marriage of broadcast, Net titans
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NEW YORK (CNNfn) - USA Networks Barry Diller is once again brokering a billion-dollar deal, buying Internet portal Lycos to create an online powerhouse.
CNNfn spoke with Diller and Lycos Chief Executive Officer Robert Davis about the specifics of the deal and what customers can expect from the newly formed media powerhouse.
Here is their "Trading Places" interview:
BRUCE FRANCIS, CNNfn CORRESPONDENT: The market is struggling to put a value on this, and we're talking to the deal makers. Once again, USA Networks, along with Ticketmaster City Search Online, merging the interactive and commerce businesses along with Lycos today and creating a company called USA Lycos.
It's going to have a billion and a half dollars in revenue, nearly 50 percent of web users, access to 70 million television homes and a very complicated business plan that we're going to try to sort out right now with Barry Diller, CEO of USA Networks, and Bob Davis, CEO of Lycos.
Mr. Diller, let me start with you, why Lycos? Why did Lycos make sense for you as a portal site?
BARRY DILLER, CEO, USA NETWORKS: Well, because I think Lycos has done the best job of everybody over the last two years in kind of adverse conditions all on its own with no real working partner and not a lot of money. They are the ones who had the fastest growth. They have aggregated more people, more sites, more things, more quickly than anyone else.
FRANCIS: It also had one of the lower market valuations out there right now. Was Lycos a bargain to you?
DILLER: I wouldn't say it was a bargain. Besides, again, we haven't purchased Lycos. What we have done is we've merged together a group of entities. We've merged together several companies.
We've merged together our Home Shopping Network, our Ticketmaster, our Internet Shopping network and we've put them in together with Ticketmaster Citysearch which is a local portal site together with Lycos.
And what we've created under one roof is a company that's really able, I think, arguably better able to make this transition to real, real serious e-commerce over the next couple of years.
FRANCIS: You were talking about that on the conference call this morning. How is it going to work for people who are watching USA Networks or Home Shopping Network. Are there going to be onscreen connections to Lycos? How will users experience this?
DILLER: We're at the very beginning stages of all this architecture. The fact is that USA Networks, what we've got is we reach 75 million households. The HSN Network, we reach 70 million household.
What we're going do, we think, we hope, in an intelligent and seamless manner is we are going to tell people about the products that Lycos and Ticketmaster Citysearch online have.
So that over a period of time, just like the Disney properties are telling people about the Go Network and NBC is telling people about Snap, we think we've got just as many aggregate eyeballs to tell people about our online products.
We have the one additional thing that we're putting real e-commerce into this. And in putting e-commerce into this, we think ... that makes this transaction so much greater than the sum of its parts.
FRANCIS: Mr. Davis, let me ask you some questions about this deal as well. There is a perception in the market today with your stock down so sharply, that there isn't a strong premium for Lycos in this deal. I know you've been making some strong strides against that perception. .
BOB DAVIS, CEO, LYCOS: It's all in the eyes of the shareholders to what we have as a premium.
But, let's start back and look at some fundamental facts. Number one, we have a sell on the rumor, buy on the news scenario that certainly takes place today and unfortunately in a down market, we have not only ourselves, but all Internet stocks trailing off today.
And I'll add, I guess, here's a note of reassurance I think for our investors. If you look at the five acquisitions that Lycos has completed, the stock traded off on four of them.
You look at where it is today versus where it was a year ago. I think day one it doesn't tell us a lot in a long story.
Having said that, if we look at what we have built today for our shareholders, we have a business generating a billion and a half dollars revenue.
That dwarfs any other traditional Internet company. Any competitor, regardless of who its might be, is left behind in terms of share, scale and magnitude.
If you take yesterday's trading multiple where people believe what we could do as it relates to a web model and apply it to that business today that would assume some 150 percent premium, if you just take yesterday's trading multiple.
So, I think it's tough to say what the premium is and isn't until the new entity is formed which doesn't come together for another four months before it even exists.
FRANCIS: Bob, trying to decide between partners here, if you read the press accounts you were probably the "belle of the ball," you are linked to just about every major media company.
You said in the conference call this morning, a major network just offered promotion, but USA Networks offered so much more. You seem more centered here on e-commerce than the other alliances.
DAVIS: You know what? I seem more centered on sustainable and growing revenues and I think that's really what the difference becomes of what we put together here.
We have, as you said, the "belle of the ball," which I think is a good analogy because we had dialog with probably every media/communications conglomerate in the country -- and for that matter the world -- about a potential alliance, and I felt great because to a certain extent we had the pick of the litter as we started to look at what transaction we might put together.
It was only in the last couple of weeks that Barry and I got serious. Having said all of that, a traditional network brings me promotion.
They can give me -- the only asset they can give to me is put the Lycos name on air, put my logo on air, and tell people about me so they'll use my service.
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