The worst acquisition ever?
There have always been mergers and acquisitions based on what can be termed "irrational exuberance." And the Internet bubble certainly resulted in many of them, most famously Time-Warner's disastrous deal with AOL. But any even bigger blender has made into the news lately, even if it involved fewer dollars.
In May of 2000, at the height of the boom, Terra Networks, a division of Spanish telephone company Telefonica SA, bought our Internet portal and search engine Lycos to form Terra Lycos. At that time, Lycos must have seemed a possible rival to AOL, MSN, and Yahoo. The cost of the Spanish company was $12.5 billion in stock.
Recently, Daum Communications, a South Korean Internet service provider, bought Lycos (at least the US division) for $95 million. In other words, $12.4 billion of the equity had pretty well disappeared somewhere. That's not counting the operating losses that the never profitable Terra Lycos generated over the past four years, mostly because of the Lycos millstone.
Lycos is said to be the seventh most popular Web portal. But to judge from my experience on this site, Lycos searches are extremely rare to the point of being almost nonexistent. Lycos's others ties include Wired News, Tripod.com, HotBot.com and Angelfire.com. It also has some 170,000 subscribers (many for hosting personal Web sites through Tripod. Terra will retain its portal in Europe and a Spanish-language portal in the US.
Daum sees this move as a chance to get a foothold in the US market. While they won't be servicing an outrageous debt, it's hard to imagine how they can expand or even hold on to Lycos's position. Starting out as the seventh biggest portal when almost no-one uses any but the four big ones (Google, AOL, MSN, and Yahoo), all of which have deep pockets and wide recognition. Being #7 in a market? Not a winning game.
I have only one question: into whose pockets did the missing $12+ billion go?
8:05:09 PM 
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