Terra Lycos says it won't buy EarthLink or CNET

Reports that Terra Lycos SA is in talks to buy EarthLink Inc. or CNET are unfounded, according to the vice chairman of Terra Lycos.

But Bob Davis, Lycos Inc.'s founder and former CEO, said Friday that Terra Lycos, like all portals, must continue to roll out more content to remain competitive. Davis, now the vice chairman of Terra Lycos, steered Lycos as it went from fledgling Internet search engine to major media property - one that was worth US$5.4 billion when he sold it to Terra Networks SA, the Internet division of the Spanish telecom company Telefonica SA.

The portal market is "pretty fully consolidated," Davis said. Still, he said he foresees Yahoo Inc. partnering with an entertainment company and acknowledged reports that Excite@Home Inc. might shed its media component. "I think their future is very bright," he said of Yahoo.

He said portals will become analogous to network television. "They are all-purpose information and entertainment hubs," he said. As a partner with venture capital firm Highland Capital Partners, Davis is now exploring the convergence of technologies such as television and the Web.

Davis said he regrets that the financial markets and CMGI Inc., which owned 20 percent of Lycos, killed USA Networks Inc.'s proposed acquisition of Lycos in 1999.

"No one believed they needed to embrace this revolutionary union," Davis explains in his recently published book, Speed Is Life: Street Smart Lessons from the Front Lines of Business, proceeds from which will go to the National Center for Missing and Exploited Children. At that time, he wrote, "I was becoming the antichrist to many individual investors who refused to believe any scenario that did not feature Internet stocks soaring into the stratosphere."

Davis argues today that the USA deal was ahead of its time, coming as it did about 12 months before America Online Inc. announced it would acquire Time Warner Inc. But Davis said he has no regrets about selling his company to Terra Networks last May. He noted that the selling price marked a return of 300,000 percent for the company's initial investors, who provided Lycos with $2 million in financing.

Davis, who started Lycos about a year behind competitors Yahoo and Excite, pointed to the company's branding strategy and focus on profits as two factors in its success.

"Coming to it late we had to change the rules," he said. He looked at traditional media companies, such as Viacom and Time Warner and decided that their approach could work for portals, too. That meant creating multiple brands for Lycos' properties, including Quote.com, Gamesville and Wired Digital.

Such a practice stands in sharp contrast to Yahoo, which uses its name on channels such as YahooFinance and YahooShopping.

Davis notes that Lycos was criticized for posting a profit in 1997, when many investors wanted Internet companies to emphasize growth rather than the bottom line. Davis says that today's renewed emphasis on profits shows that there's no difference between the Internet companies and so-called old-economy companies.

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