| BUSINESSWEEK ONLINE : OCTOBER 25, 1999 ISSUE | ||||||||
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| COVER STORY
Lycos: The Chick That Didn't Fly the Coop So whatever happened to Lycos? The Web portal, one of the most prominent companies in CMGI Inc.'s constellation, ended up at the heart of a nasty battle between David S. Wetherell and USA Network Chief Barry Diller last spring. Wetherell initially backed a deal by Lycos Inc. CEO Robert J. Davis to sell the portal to Diller in a roughly $5 billion stock deal. But after Lycos shares dropped more than 40% in the wake of the bid--cutting the value of Diller's offer by as much--Wetherell pulled his support. Arguing that the new price for the money-losing portal was far too low, Wetherell resigned from Lycos' board and used CMGI's 17% stake to lead a shareholder rebellion, eventually forcing Diller to back off. Today, Davis says he and Wetherell no longer talk strategy as often as they did in the past, but they've buried the hatchet. ''We're the two largest Internet companies in Massachusetts,'' says Davis. ''It makes sense for us to have a sound business relationship.'' Lycos continues to have ties to many of CMGI's other companies, and its performance doesn't seem to have suffered. The portal's audience share continues to grow--its 29,000 visitors every month make it the fourth most popular site on the Web, according to Media Metrix Inc. Revenues more than doubled in the fiscal year ended July 31, to $135 million, although net losses also nearly doubled, to $52 million. Despite the losses, Lycos shares now trade at around 58, making up most of the ground lost during the fight. As for Wetherell, the victory was a turning point. CMGI drew attention outside Internet investment circles, and Wetherell enjoyed a moment in the sun as the standard bearer for new media. He prevailed over Diller and his backers in traditional media who, Wetherell said repeatedly, just didn't get the Net--or understand its sky-high valuations. But in the end, the battle over Lycos also tarnished Wetherell's credibility among some Net industry figures. After his extremely public flip-flop, they consider him untrustworthy. ''He's more famous now,'' says George Bell, CEO of Excite Inc., which competes with Lycos and CMGI's newly acquired AltaVista portal. ''But do you want him on your board more or less because of that chapter? He failed to show support for the company he invested in.'' After vanquishing Diller, Wetherell made no secret that he wanted to tie Lycos in even closer to the CMGI network. Periodic speculation continues that he's interested in acquiring a controlling stake. But the 83% stake he took in AltaVista--for less than half the $5.3 billion market cap Lycos now sports--makes a bid look unlikely. And for now, Wetherell is refocusing CMGI's efforts on building up AltaVista and solidifying its ties with his other holdings. AltaVista's managers now participate in the Monday morning strategy sessions Wetherell holds for his wholly owned subsidiaries--something Davis never did. The irony: Lycos never wanted its independence. But increasingly, that looks like the road the company will end up taking. By Paul C. Judge in Andover, Mass. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS David Wetherell: Internet Evangelist COVER IMAGE: David Wetherell: Internet Evangelist CHART: CMGI's Rocketing Shares TABLE: David Wetherell's Internet Empire RESUME: David S. Wetherell PHOTO: David Wetherell, Age 5 One Big Happy Family--But for How Long? Lycos: The Chick That Didn't Fly the Coop ONLINE ORIGINAL: Should You Invest In the Companies CMGI Invests In? INTERACT E-Mail to Business Week Online | |||
