Lycos Shares Fall After Deal

Shares of Lycos Inc. fell Wednesday as investors appeared to be disappointed by USA Networks’ buyout offer.

Lycos shares were off 5-3/16 to 89-1/16 in early-afternoon trading, after being down more than 10 earlier in the day. That drop came after a 25 percent decline on Tuesday.

Lycos Chief Executive Officer Bob Davis said Wednesday the decline showed investors misunderstood the deal. He told Reuters the deal had “all the excitement of the Internet combined with substantial earnings and cash flow.”

“This will be seen as a defining moment for Internet companies, he said.

However, several money managers attending an investment conference where Davis spoke said they were “baffled” by the deal’s complexities. One analyst said she feared Lycos had been out-negotiated by USA Networks chief Barry Diller.

Other analysts said investors were probably disappointed Lycos didn’t fetch the 57 percent premium that Excite did in its $6.7 billion merger with @Home.

Three leading Wall Street firms also lowered their ratings on Lycos Wednesday. CS First Boston cut its rating to “hold” from “buy,” BT Alex. Brown cut its rating to “buy” from “strong buy” and Oppenheimer lowered its recommendation to “hold” from “buy.”

Davis told analysts the big promise of the deal lies in electronic commerce opportunities, given the 70 million member audience of Home Shopping Network, also controlled by USA Networks, and Lycos network’s 30 million monthly visitors.