About the only one of the top 10 Web sites that popped on @Home’s $6.7
billion (fully-diluted) offer for Excite was Lycos, leading to speculation
that the spider turned commune leader may be looking to sell a chunk of
itself to a large media partner. Rumors to that effect got dusted off the
shelf with the rattle and hum targeting Lycos perhaps trying to sell about
20% of itself.
Excite’s deal drew out some value as it’s up 40% to $300
per unique user in our WEBDEX metric. LCOS gained 8% to $171 per pair of
eyeballs.
While Lycos may be trying to unload a minority position we
think that serious buyers may want more than that — like control and
enough sway. For example, Disney acquired 43% of Infoseek for $430 million
and a few Disneyland t-shirts. It has the rights to acquire majority.
Based on SEEK’s value January 20 Disney’s $430 million has already gone
up more than 110% using SEEK’s $2 billion market cap as a guide.
If a
buyer steps out for Lycos the value could be pulled more in line — or even
higher — than Excite’s deal bid based on the girth factor alone. Lycos
reaches 59% more users than Excite and 114% more users than
Infoseek.
Possible Lycos buyers? There’s the ‘should’ and ‘could.’ First
the should: Time Warner, Viacom, CBS or Bertelsmann. The could (includes
those mentioned plus): Microsoft, Intel (how’s that for one out of the box!
Intel Outside),
Yahoo (which needs to make a big move now to stay in the top tier).
Let’s
do this with sound bytes:
Lycos’ Possible Buyers & Why
Lycos | + | Time Warner | = | Road rage |
Lycos | + | Viacom | = | MTV, Hollywood meets Web |
Lycos | + | Microsoft | = | MSN-Plus |
Lycos | + | Intel | = | The silicon surfer |
Lycos | + | Yahoo | = | Web-to-Web power play |
Lycos | + | Bertelsmann | = | Global power partner |
Lycos | + | CBS | = | Spider’s Eye |
Forget Time Warner’s Road Runner. @Home-Excite almost demands that Time
Warner finally get in on large traffic. Time Warner’s web sites have about
11.5 million unique monthly users now but with Lycos suddenly Road Runner
(Time Warner’s cable Internet) becomes ‘Road Rage.’
Viacom is shown here
because it’s a sleeper. We’ve waited 4 years for Viacom to understand the
Internet but maybe they’ll have to wait for the ‘Internet Mergers &
Acquisitions For Beginners’ book to come out first before they get active
here.
Microsoft would be a natural-born buyer if it can do a deal amid
all the hand-gesturing going on with its anti-trust trial. Has the cash,
has the reach. Not sure if Lycos would mesh with Microsoft’s
culture.
Intel could be the dark horse here. A long shot but last week
Intel threw its 1999 outlook party and its new slogan is — Intel, #1 On
The Net. They even splurged and had shirts done so we know Andy Grove is
serious. If he’s really serious then Lycos may be an instant path to
Internet superpower.
Intel lacks a front end, user-centric online
presence at all. This would be the most interesting play for both sides
because Lycos could use Intel’s clout on the desktop and Intel could
diversify its revenue streams into something that still takes chips to make
it happen, namely the Web. Intel has the cash also. Chips and salsa.
WEBDEX – Value Per Unique User
Internet.com’s | December | Jan 13 | Jan 20 | Jan 13 | Jan 20 | Percent |
WEBDEX | Users | Market cap or PMV* | Market cap or PMV* | User | User | change |
(millions) | (millions) | (millions) | Value | Value | ||
AOL.com* | 31.0 | $7,000 | $6,800 | $226 | $220 | -2.9% |
Microsoft.com* | 27.5 | $8,500 | $8,300 | $309 | $302 | -2.4% |
Yahoo | 27.4 | $31,877 | $28,343 | $1,164 | $1,035 | -11.1% |
Lycos | 26.4 | $4,163 | $4,501 | $158 | $171 | 8.1% |
GeoCities | 19.0 | $2,170 | $2,045 | $114 | $108 | -5.8% |
Netscape.com* | 17.5 | $3,400 | $3,300 | $194 | $188 | -2.9% |
Excite | 16.5 | $3,579 | $4,985 | $216 | $301 | 39.3% |
Disney.com | 13.6 | $3,200 | $3,300 | $236 | $243 | 3.1% |
Infoseek | 12.3 | $2,384 | $2,098 | $194 | $170 | -12.0% |
Blue Mtn. Arts | 12.3 | NM | NM | NM | NM | NM |
TOTAL | 200.1 | $66,273 | $63,672 | $2,811 | $2,738 | -2.6% |
AVERAGE | 21.2 | $7,364 | $7,075 | $312 | $304 | -2.6% |
*pmv = private market value for Web asset only. Blue Mountain Arts is shown
since it was the #10 site for December due to the popularity of sending
holiday e-cards. We don’t show a valuation for this since it appears
seasonal.
Bertelsmann ought to buy since it has deals with Lycos, joint ventures in
Europe. But Bertelsmann may perhaps be a small stakes kind of company and
not an all-out buyer.
CBS and Lycos would make a media continuum – TV,
radio, Web – with the kind of cross-promotion and pollination that media
undergoes. We dub this the ‘media continuum’ where it doesn’t matter where
or how you get your information or communication, just how good the service
is and if it’s a fair value. End-user thinking and not board-room
sci-fi.
Beyond Lycos we think that the top 25 Web properties especially
could see rapid consolidation and further merging with larger strategic
acquirers. The new stakes seem to foreshadow this: AOL-Netscape;
@Home-Excite.
If these deals go forth we expect WEBDEX value per user to
find a more common footing as the more deals are done the scarcer users and
large traffic become. Example: AOL agreed to acquire Netscape for $4.2
billion or $239 for each Netscape unique user. @Home’s bid for Excite is
$6.7 billion or $405 per unique user. The value war has only really begun.
Harmon’s Hotwatch ’99 – the 10 stocks to watch in
the Internet
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