South Korean firm snaps up Lycos

South Korea tops broadband internet use tables

South Korean top internet portal Daum Communications is buying US web portal Lycos Inc from Terra Lycos of Spain, to push its way into the US market.

Daum said it had agreed to pay 111.2bn won ($95m; £52m) for Lycos Inc as a springboard into the US market from which to then become a global player.

South Korea has 60% of households online, of which 11 million homes, or more than one third, use broadband.

The two sites both offer teenager friendly news, e-mail and shopping.

Among its suggested search topics, Lycos offers designer denims, disposable swimwear, tips on how to find a missing pet, and drinking beer.

Lycos Inc also owns Tripod which allows users to build personalised web sites, and runs an online version of Wired, a technology news magazine.

Change of fortunes

The sale price for Lycos Inc reflects the precipitous drop in the valuations of internet stocks since the dot.com crash in mid-2000.

In May 2000, Spanish web firm Terra thought it worth $12.5bn in shares to acquire Lycos, a US internet search engine.

In April this year, Terra Lycos put the loss-making, Nasdaq listed US business up for sale with a price tag of $170m. In its own books, Terra Lycos went for a write down of Lycos to 75m euros ($84m; £46m), a sum closer to what Daum has paid.

Daum said Lycos has 170,000 paying subscribers and 6% of the online banner advertising market in the US.

The purchase meant Daum was "ready to take off in its globalisation initiative", said Daum president Lee Jae-Woong.

Chinese moves

South Korea's internet firms are developing increasingly ambitious strategies for foreign markets.

The country's games designers have successfully moved into China in a series of licensing and development tie-ups with Chinese online games makers.

But investors were doubtful about the wisdom of Daum's purchase.

The firm's shares initially rose 2.4% on news of the deal, but had slumped 5.18% by the market's close as analysts looked more closely at the deal and queried how much Daum could expect to earn from loss-making Lycos Inc.

"The buyout price looks reasonable for now, but whether Daum will benefit from the buyout depends on whether synergies could be found, " said ST Hwang, an analyst at Hyundai Securities in Seoul.

Terra Lycos is 72% owned by Spanish phone operator Telefonica.