Lycos and Excite: A Tale of Two Buyouts
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Though easily outperformed by fellow IPO Class of April '96 portal company Yahoo!, Excite and Lycos each have seen their stock prices and market capitalizations increase substantially, especially in the past year.
But unlike Yahoo!, neither Lycos nor Excite have been able to turn a profit, despite solid revenue growth. Excite, for example, has seen sales rise from $14.1 million in 1996 to $50.1 million in '97 and $154.1 million last year, while losses for those same years were $43.1 million, $42.4 million and $37 million, respectively.
And on Thursday, Excite announced first quarter revenue of $54.1 million, a 123% increase over the $24.1 million in revenue for Q1 '98. Still, the company lost $7.4 million in Q1, only slightly less than the $7.5 million loss in the same quarter last year.
Lycos, meanwhile, has seen revenues grow from $5.3 million to $22.3 million in 1997 to $56.1 million in fiscal '98. Like Excite, though, Lycos has dwelled in the red, losing $5.1 million in '96, $6.6 million in '97 and $3.6 million last year.
Realizing they were unlikely to close the revenue, market cap or site traffic gap with Yahoo! anytime soon without help, both companies announced deals earlier this year to be acquired.
The reactions to each deal, however, varied dramatically. When @Home revealed in January plans to buy Excite for $6.7 billion, share prices of the No. 2 Web portal immediately rose 63% to $110. Share price bounced between $90 and $110 for the next two months before a run-up beginning in March that saw Excite's stock close at an all-time high of $171.96 this past Monday.
In contrast, USA Networks' bid to purchase Lycos met with fierce skepticism from investors, who felt the $5.7 billion price tag undervalued the fourth most-popular Web destination. On Feb. 8, Lycos shares closed at $127.25. A day later, when the USA Networks deal was announced, Lycos stock ended the day at $94.25, a 26% plunge.
Since then Lycos shares have traded in the $80s and low $90s, until a surge last week that took prices in the low $100s this week. (The stock spiked briefly to close at $108.81 on April 6 amid rumors that the USA Networks deal would be upgraded, then fell $10 the next day.)
If the USA Networks deal goes through, plans call for combining Lycos' search directory and community sites with the Home Shopping Network and Ticketmaster Online-CitySearch.
@Home intends to deliver Excite's content over its high-speed Internet access systems.
Coming Next Week
No definites, but start looking for Marimba, Razorfish, Internet Financial Services, Town Pages Net.com plc and CAIS Internet.