Is NBC about to cut a deal with Lycos?
That's what sources at NBC and within the Internet industry are saying. The deal would give NBC a substantial equity stake in Lycos -- probably 35 percent, industry sources say -- in exchange for cash and promotional time on the NBC network.
An NBC-Lycos alliance would likely mean that Snap -- the portal run by CNET that is 60 percent owned by NBC -- would merge with Lycos. Disney did the same kind of deal last year, buying a stake in Infoseek by selling its Starwave property to the portal. This deal, according to observers familiar with the negotiations, is also highly complicated, and may involve NBC spinning off its Internet properties into a separate company.
Even a partial takeover of Lycos -- which, aside from Yahoo, is the last independent major portal -- would almost certainly be worth more than a billion dollars. "This is going to be a big deal," said an executive with knowledge of the matter. "It's super red-hot right now."
NBC and its Internet properties were rife with rumors all last week. At one point, chatter at Snap about possible takeovers or sales was said to have become so overwhelming that the company's chief financial officer had to send out a message telling employees to cease gossiping and get back to work.
The network's public relations squad declined to confirm that any Internet deal is imminent. "We're constantly looking at opportunities in the Internet space, (and) at ways to grow our business and become more efficient," said Maria Battaglia, vice president of corporate communications for NBC. "There's been tons of speculation, and I would say it's premature to make any bets." An official at Snap had no comment.
Lycos wouldn't confirm or deny a deal, either: "We don't comment on rumors," said a representative. However, several financial analysts told The Standard they were expecting a deal within weeks.
In the last several weeks, Lycos has sent out conflicting signals about potential courtships. In late January, the Wall Street Journal reported that the company was having talks with a bevy of big media players, including NBC, Viacom, Bertelsmann, CBS, Disney and News Corp. Lycos' stock price has nearly tripled since the beginning of the year, in part due to investor anticipation of a takeover; its current market capitalization is about US$5.5 billion.
But last week, Lycos Chief Executive Officer Robert Davis insisted to U.S. News & World Report that he had no plans to sell, saying, "We are fiercely dedicated to our independent strategy." The two stances are not necessarily contradictory, however. Because Lycos has been legally autonomous only since November 1997, any company seeking to merge with Lycos before November 1999 would not be able to use the "pooling" method of accounting. Without that advantage, an outright purchase could be more expensive. That is one reason why, industry sources say, NBC is seeking partial ownership of Lycos for now, with an option to buy the rest at a later date.
Uniting Snap and Lycos would create the Web's largest portal. According to December figures from Media Metrix, Lycos already reaches 46.5 percent of all Internet users, second among portals only to Yahoo's 48.2 percent reach. Lycos has built that audience largely through acquisitions of other Web properties, including Tripod and HotBot.
While Snap's reach is significantly smaller than Lycos' -- 9.5 percent -- it has grown 144 percent since NBC began promoting it on the air, according to CNET.
NBC -- a division of General Electric -- has been rumored for several weeks to be close to making a major Internet move. Published reports put the total value of the company's Internet holdings at $2 billion. That includes its 5 percent stake in CNET, 6 percent stake in Intertainer, 5 percent stake in the soon-to-be-public iVillage, and the various Internet holdings of GE Capital. In late January, Electronic Media magazine reported that the network was considering a "public spin-off of its online assets," although network officials insist that no firm decision has been made in that direction.