Terra Lycos finds buyer for U.S. unit

Terra Lycos has chosen a potential buyer for its U.S. Lycos subsidiary, the Barcelona provider of Internet access, services and content disclosed Wednesday in a filing with Spain’s Comisión Nacional del Mercado de Valores, the agency in charge of supervising the country’s stock markets and related activities.

Terra Lycos has chosen a potential buyer for its U.S. Lycos subsidiary, the Barcelona provider of Internet access, services and content disclosed Wednesday in a filing with Spain’s Comisión Nacional del Mercado de Valores, the agency in charge of supervising the country’s stock markets and related activities.

The sale price will be in the range of $95 million to $115 million, the filing states. This is a far cry from the $12.5 billion Terra Lycos paid for Waltham, Mass.-based Lycos in May 2000, in the heady days of the Internet frenzy. Terra Lycos, with its largest base of operations in Madrid, will disclose the potential buyer’s name when the two parties reach a definitive agreement, according to Wednesday’s filing.

Lycos has been trying to compete in the general-purpose Web portal market, and Terra Lycos probably realized that the field has clearly become dominated by Yahoo, AOL and Microsoft’s MSN unit, said David Card, a Jupiter Research analyst. Lycos, while entrenched in that market’s second tier, isn’t close to breaking into the top tier in key metrics, such as advertising revenue and traffic, Card said. “The difference between the top guys and everybody else is pretty striking, ” he said.

A better strategy for Lycos would have been to narrow its focus to go after a specific type of user and become a niche player, thus becoming a more attractive advertising platform for companies looking to reach a specific demographic, Card said. However, it has remained largely a general-purpose portal trying to compete against formidable opponents, he said.

“Lycos hasn’t created a niche strategy or a focused strategy. I think they were thinking about it a few management teams ago but they haven’t been doing it lately,” he said. “My criticism of Lycos for the past several years is that it didn’t create a focus.”

Still, it is clear to see how Lycos would be attractive to a buyer, especially a non-U.S. company, he said. “Lycos gives (the buyer) an instant U.S. presence. However, it’s not an instantly successful business. The buyer is going to have to figure out how to grow (the business) or how to differentiate it,” he said.

The Terra Lycos Web properties ranked seventh among the top 50 Web destinations in terms of unique visitors in the U.S. in June, according to the comScore Networks rankings. Leading the category was Yahoo, followed by the MSN/Microsoft sites, the Time Warner network (to which AOL belongs), Google’s sites, eBay and Ask Jeeves.

Prior to the sale, some Lycos assets will be transferred over to Terra Lycos, including Lycos’ stakes in the Terra Networks USA and Lycos Europe units. Terra Networks USA’s most visible activity is the operation of the Terra.com portal for U.S. Hispanics, a Terra Lycos spokeswoman said. Meanwhile, Lycos Europe operates a network of European Web sites in various languages and provides a variety of Internet services and content, according to information found on its Web site.

The decision to sell Lycos comes after Terra Lycos said in an April filing with the Spanish stock exchange commission that it was reviewing some of its operating units, and that as part of the process it was considering several options for Lycos, although no specific decision was made at the time.