Type: 425
Sequence: 1
Description: Rule 425 Communications
Filed by Lycos, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Commission File Number 0-27830
Subject Company: Terra Networks, S.A.
This announcement contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These statements are based on management's current
expectations or beliefs and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. The forward-looking statements
contained herein address future financial and operating results and the
benefits of the merger. The following factors, among others, could cause
actual results to differ materially from those described in the
forward-looking statements: the risk that our businesses will not be
integrated successfully; costs related to the merger; increased competition
and its effects on pricing, spending, third-party relationships and revenues;
inability to obtain, or meet conditions imposed for, antitrust approvals
related to the merger; inability to further identify, develop and achieve
commercial success for new products, services and technologies; inability to
establish and maintain relationships with commerce, advertising, marketing,
technology and content providers; and failure to obtain necessary stockholder
approvals for the merger. For a detailed discussion of these and other
cautionary statements, please refer to Lycos' and Terra's filings with the
Securities and Exchange Commission.
Investors and security holders are urged to read the proxy
statement/prospectus regarding the merger when it is finalized and becomes
available, because it will contain important information. Lycos and Terra will
file the proxy statement/prospectus with the Securities and Exchange
Commission. Investors and security holders may obtain a free copy of the final
proxy statement/prospectus (when it is available) and other documents filed by
Lycos and Terra with the SEC at the SEC's web site at www.sec.gov. The proxy
statement/prospectus and these other documents may also be obtained for free
from Lycos or Terra.
[GRAPHIC OMITTED]
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Tel: 781-370-2700
Fax: 781-370-2600
Internet: http://www.lycos.com
FOR IMMEDIATE RELEASE
Contact: Ted Philip Michele Perry
Chief Financial Officer Director of Communications
Lycos, Inc. Lycos, Inc.
781-370-2700 781-370-2700
tphilip@lycos-inc.com mperry@lycos-inc.com
LYCOS REPORTS FOURTH QUARTER
AND YEAR END RESULTS
Revenues Increase 110% for the Year
Pro Forma Earnings Per Share of $0.12 for the Quarter
Operating Margins Improve by 82% for the Quarter
Daily Page Views Up 36% from Previous Quarter to 201 Million
Minutes of Usage per Visitor Climbs 35% for the Year
Waltham, Mass., August 15, 2000-- Lycos, Inc. (NASDAQ: LCOS), the Internet's
premier global media network, today announced financial results for its fourth
quarter and fiscal year ended July 31, 2000. Revenues for the fiscal year
ended July 31, 2000, rose 110% from the previous fiscal year to $291 million.
Revenues for the quarter were $88 million, representing an increase of 89%
over the corresponding quarter from the previous fiscal year. Net income for
the quarter was $13 million or $0.12 per share, excluding amortization of
goodwill, merger-related expenses and other non-recurring items. This compares
to a net loss of $3 million or ($0.04) per share for the comparable period
from the previous fiscal year. Including amortization of goodwill,
merger-related expenses and other non-recurring items, net income for the year
was $21 million or $0.19 per share as compared to a loss of $52 million or
($0.59) per share for the previous fiscal year.
"This was an exceptional year for the company, with this most recent period
marking the 18th consecutive quarter during which we met or exceeded consensus
estimates," said Bob Davis, president and CEO of Lycos, Inc. "The continued
momentum resulting from both our Network model and unsurpassed global
platform, with operations now in an industry-leading 28 countries, positions
us strongly in the race for worldwide leadership."
"We continued to deliver against all key components of our strategy this
quarter and we made great progress toward achieving our long-term operating
model, improving margins to 13%, up from 8% last quarter," said Ted Philip,
chief operating officer and chief financial officer of Lycos. "These operating
results, combined with our industry-leading 36% page view growth delivered by
our Network model are evidence of the strong momentum we expect to carry into
our planned merger with Terra Networks as we continue to gain critical market
share in each targeted region of the world."
3
Regarding the planned merger with Terra Networks, Mr. Davis added, "The Terra
Lycos combination is right on track. We have completed all requisite filings
and Terra's $2 billion rights offering is expected to commence later this
month and close in mid September. We expect to complete the merger in October,
thereby accelerating the momentum we once again established this quarter."
The Company announced on May 16, 2000 that it had entered into definitive
agreements with Terra Networks, S.A. (MC: TRR; NASDAQ: TRRA), the leading
provider of Internet access and interactive content and services to the
Spanish- and Portuguese-speaking world, Telefonica, S.A., the largest supplier
of telecommunication services in the Spanish-and Portuguese-speaking world,
and Bertelsmann, the third largest media company in the world with more than
600 companies in 54 countries. Under terms of the agreements, Lycos and Terra
will combine, creating Terra Lycos in a stock-for-stock transaction. The
transaction is subject to certain collar provisions which, as of August 15,
2000, provide for the exchange of 2.15 shares of Terra for each share of
Lycos. All requisite regulatory filings have been completed and the
transaction is presently expected to be completed in October of this year. The
formation of Terra Lycos creates a global Internet powerhouse with market
leadership in key strategic areas such as:
o #1 global platform with operations in 39 countries and market leadership
positions in such major markets as Latin America, Canada and Korea
o #1 growth rate with an anticipated revenue growth of nearly 80% in 2001
o #1 mobile platform with the creation of a joint venture with Telefonica
Moviles, one of the world's largest providers of mobile phone services
with approximately 20 million subscribers
o #1 cash position in the industry with over $3 billion in cash to fuel
market share growth in all regions of the world
The agreements with Telefonica include, among other things, a commitment by
Telefonica to underwrite a $2 billion rights offering by Terra prior to the
closing of the merger as well as a joint venture with Telefonica Moviles, in
which Terra Lycos owns a 49% stake, giving Terra Lycos access to Telefonica's
extensive cable, fixed line, broadband, satellite and wireless networks, which
now serve over 60 million customers globally. In addition, as part of these
agreements, Terra Lycos entered into a five-year, $1 billion broad strategic
relationship with Bertelsmann and Telefonica for the purchase of advertising,
commerce and integration services. As part of the relationship, Terra Lycos
will gain access to Bertelsmann's premier catalogue of books, music,
television, film and other media content, on preferred terms.
Key accomplishments for Lycos in the fourth quarter 2000:
Audience Growth
o Worldwide traffic to the Lycos Network averaged 201 million page views
per day in July, leading the industry with over 36% growth over the
previous quarter.
o Registered users grew 17% to 61 million worldwide, with new users signing
up at a rate of more than 100,000 per day.
International Expansion
o The Company continued its ambitious roll-out of international operations,
adding four new services in China, Taiwan, Hong Kong and India.
4
o The Lycos global media network today offers services on 79 sites in 28
countries throughout the world and in 14 languages.
o Lycos Japan and Kadokawa Shoten launched Lycos Internet Magazine in
Japan. The August 2000 inaugural issue featured a CDROM complete with
premium Internet services and entertainment programs. Lycos Internet
Magazine targets young professional men and women and provides
information on using the power of the Internet to make life easier and
more fun.
Wireless Offerings
o Lycos Anywhere (TM), a comprehensive wireless initiative, was
successfully launched. Lycos Anywhere is a group of products and services
that connect Lycos users to information from across the Lycos Network via
their wireless devices, wherever they go.
o InPhonic.com, the leading business-to-business solutions provider of
branded, customized wireless telecommunications services, and Lycos
entered into an agreement to market Lycos-branded cell phones and WAP
phones with wireless services to Lycos users.
o Lycos launched My Lycos Investing, delivering unprecedented
personalization of finance data to users. The new site combines the
industry-leading financial information delivered by Lycos's Quote.com
site with the personalization capabilities of the My Lycos platform
already used by millions.
Acquisitions and Investments
o Lycos completed the acquisition of MetroSplash, owner of Matchmaker.com,
a leading personal classifieds site and one of the "stickiest" sites on
the Internet. The acquisition provides Lycos users with a new personal
classifieds community offering as well as providing Lycos with an
additional subscription revenue source and an attractive site for
advertisers.
o Lycos exercised its warrants to acquire 15 percent of Fast Search &
Transfer (FAST), a leading Internet search technology provider. FAST is a
strategic provider of various search technologies to the Lycos Network,
including MP3 search, multimedia search, music hosting and FTP search.
o LycosLabs, an Internet accelerator, made its first investment, providing
funding to thinkingBytes Technology, Inc., a new wireless provider of
applications for the Personal Digital Assistant market. LycosLabs' focus
is on financing and incubating new businesses that have the greatest
synergies with the core competencies and long-range goals of the Lycos
Network.
Key accomplishments for Lycos in fiscal year 2000:
Financial Milestones
o Revenues soared 110% from $139 million in 1999 to $291 million in 2000.
o The Company reported its first profitable year with net income of $21
million or $0.19 per share as compared to a loss of $52 million or
($0.59) per share for the previous fiscal year.
o Operating margins showed a 23-point improvement from the fourth quarter
of 1999.
o The Company generated over $77 million in cash from operations during the
year and raised $460 million in a highly successful secondary offering in
January.
5
o DSO's improved by approximately 20% to 31 days while receivables as a
percentage of sales for the year improved by nearly 50%.
Audience Growth
o Worldwide page views grew 164%.
o Registered users increased 91%.
o The Lycos Network model has resulted in a 46% growth in average pages
viewed by users per month and a 35% increase in the average number of
minutes spent on the Network per month.
International Expansion
o The Company launched additional services throughout the world, including
sites in Argentina, Brazil, Chile, China, Columbia, Hong Kong, India,
Japan, Korea, Malaysia, Mexico, Peru, Singapore, Sweden, Taiwan and
Venezuela.
o Lycos Europe, a joint venture between Lycos and Bertelsmann, raised
approximately $650 million in its Initial Public Offering on the Neuer
Markt in Germany.
o Bell Canada and Lycos announced the creation of a new Internet company,
Sympatico-Lycos, to provide Canadians with expanded Internet resources
for the business-to-consumer marketplace. The move establishes Lycos as
the number one player in the Canadian Internet market as the joint
venture becomes the consumer portal for Bell's dial-up, wireless and
broadband services. As part of the agreement, Bell Canada will invest $45
million in the venture. Separately, Bell ActiMedia and Lycos signed a $40
million multi-year distribution agreement.
o Lycos and Singapore Telecom formed a $50 million pan-Asian joint venture
that will bring localized versions of Lycos.com and Tripod to more than
10 additional Asian markets including China, India, and Singapore.
o Lycos Japan raised an additional $32 million of financing and added
Kadokawa Shoten, a leading media company, to the joint venture as a 7.4%
partner with Lycos, Inc., Sumitomo Corporation and Internet Initiative
Japan.
Acquisitions
o Lycos acquired Quote.com, one of the Web's most comprehensive financial
information destinations, for $78 million in stock.
o Lycos acquired IMDI, makers of Sonique, one of the world's most popular
MP3 audio players, for $55 million in stock.
o Lycos completed the acquisition of Gamesville.com for $207 million in
stock. Gamesville is one of the Web's premier content and direct
marketing companies, and one of the stickiest sites on the Internet.
o Lycos acquired Valent Software Corporation, maker of NetClubs, a leading
Internet community services platform, for $45 million in stock. Valent's
NetClubs powers Lycos Clubs, a core community service within the Lycos
Network providing the infrastructure and tools to link more than 62,000
separate online clubs that convene regularly across the Lycos Network.
Strategic Initiatives
o Lycos Ventures, L.P., a strategic investment fund created by Lycos, Inc.
and a world-class group of partners, completed investments in 10
companies including LifeMinders.com and Conducent.
o Internet Commerce Services Corporation (iCOMS), a leading commerce
applications services provider, and Lycos entered into a long-term
strategic relationship in which Lycos acquired a 14 percent stake in
iCOMS.
6
o Lycos and Trellix(R) announced a comprehensive technology and marketing
agreement. Under the terms of the agreement, Trellix will license hosting
platform technology from Lycos, enabling Trellix to offer a complete Web
site building and private label hosting service to online communities.
Also, Lycos now offers significantly improved features to builders on its
Tripod community site. As part of the agreement, Lycos will take up to a
9.5 percent equity stake in Trellix.
o Lycos acquired a 10 percent stake in Autoweb, a leading consumer
automotive Internet service. Lycos and Autoweb also announced a four-year
strategic alliance to build and jointly operate a new online automotive
channel and deliver unique marketing and e-commerce opportunities to the
auto industry.
o Lycos and CMGI's First-Up launched a free Internet access service, Lycos
Free Internet Access, to complement the high quality, free dial-up access
services offered by its joint venture partners in Europe and Asia. In
addition, Lycos Europe's free ISP, Comundo, exceeded one million users in
Germany.
Wireless Offerings
o AnyDay.com, provider of comprehensive, online calendar services, and
Lycos entered into a comprehensive distribution agreement under which
AnyDay will provide Lycos Calendar AnyDay, a wireless-enabled,
comprehensive, co-branded online calendar service to Lycos Network users.
o Pixo, Inc., a leading developer of mobile commerce solutions, and Lycos,
Inc. announced that they are working together to extend Web access from
the desktop to wireless phones including mobile transaction capabilities.
The optimized browser and streamlined purchasing give Lycos users a
better wireless Web experience.
o Ericsson, a leading provider of telecommunications solutions, and Lycos
announced an agreement to deliver Internet content to wireless service
users.
o Lycos launched wireless-enabled alert technologies and other user-driven
personalization solutions for wireless devices, powered by Puma
Technology. When Lycos users activate the new tool on the search results
page, they receive automatic notification of any updates to the search
results. Users have the flexibility to designate phones, pagers, handheld
devices or their e-mail address as the destination for their notification
message.
o Handango, the world's largest Internet marketplace for handheld computing
solutions, and Lycos launched a new marketplace on the Lycos Network that
hosts the most comprehensive collection of handheld software, hardware
and accessories for Palm and Windows-powered devices.
Commerce
o Sales volume generated through Lycos's e-commerce partnerships grew 224%
from the previous year.
o Launched Lycos Shop in October '99 - a shopping portal designed to make
shopping easier for on- line consumers by aggregating brand named and
specialty merchants across multiple shopping categories.
o Unique visitors to Lycos Shop grew 77% from Jan '00 to June '00.
o The number of merchants in Lycos Shop grew from 25 in October 1999 to
over 3,150.
o Launched Lycos Auctions in August '99 - in just one year, rank 4th in
reach in the consumer-to- consumer auction market.
o Lycos Auctions average weekly page views surged 533% from the previous
year.
o Launched Lycos Classifieds destination in June '00 - grew listings base
from 1,000 to 850,000 today.
7
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, including, without limitation, the level of usage of the
Internet and traffic to the Company's Internet site, continued acceptance of
the Company's products, demand for Internet advertising, seasonal trends in
advertising sales, the advertising budgeting cycles of individual advertisers,
capital expenditures and other costs relating to the expansion of operations,
the introduction of new products or services by the Company or its
competitors, the mix of the services sold and the channels through which those
services are sold, pricing changes, general economic conditions and specific
economic conditions in the Internet industry and other risks detailed in the
Company's filings with the Securities and Exchange Commission.
Investors and security holders are urged to read the proxy
statement/prospectus regarding the Terra Lycos business combination
transaction referenced above because it will contain important information.
The proxy statement/prospectus has been filed and a copy may be requested from
the Securities and Exchange Commission. It will be made available for free at
the Commission's Web site at www.sec.gov. within the next few weeks.
8
About Lycos, Inc. (http://www.lycos.com)
Founded in 1995, Lycos, Inc. is a leading Web media company and owner of the
Lycos Network, one of the most visited hubs on the Internet reaching nearly
one out of every two U.S. Web users. The Lycos Network is a unified set of Web
sites, attracting a diverse audience by offering a variety of services,
including leading Web search and navigation resources; Web community and
communications services including free homepage building, free Web-based
e-mail, clubs, chat, instant messaging; a personalized My Lycos start page; a
comprehensive shopping center featuring more than 3,100 merchants; and an
assortment of compelling content such as games, music, news, fun and
educational information and activities for kids as well as information about
investing, technology, entertainment, sports, small business, travel and more.
The Lycos Network is composed of Lycos.com, Tripod, WhoWhere, Angelfire,
MailCity, HotBot, HotWired, Wired News, Webmonkey, Sonique, Quote, Gamesville,
Lycos Zone and Matchmaker. Headquartered near Boston in Waltham, Mass., Lycos,
Inc. is a global Internet leader with a major presence throughout the U.S.,
Europe, Asia, Canada and Latin America.
(C)2000 Lycos, Inc. all rights reserved. Lycos(R)is a trademark of Carnegie
Mellon University. All other trademarks or service marks mentioned herein are
those of respective owners.
9
LYCOS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING MERGER AND ACQUISITION-RELATED EXPENSES
AND OTHER NON-RECURRING ITEMS (1) (2)
(In thousands except per share data)
Three Months Ended Fiscal Year Ended
July 31, July 31
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
(Unaudited) (Unaudited)
Revenues:
Advertising $56,919 $32,990 $191,653 $96,459
Electronic commerce and other 30,995 13,457 99,297 42,081
-------------------------- --------------------------
Total revenues 87,914 46,447 290,950 138,540
Cost of revenues 14,194 10,032 52,312 29,273
-------------------------- --------------------------
Gross profit 73,720 36,415 238,638 109,267
Operating expenses:
Research and development 13,319 8,771 46,916 26,963
Sales and marketing 41,902 24,272 148,768 79,325
General and administrative 7,087 7,934 27,811 17,528
-------------------------- --------------------------
Total operating expenses, excluding merger and
acquisition-related expenses and other non-
recurring items 62,308 40,977 223,495 123,816
-------------------------- --------------------------
Pro forma operating income (loss), excluding
merger and acquisition-related expenses and
other non-recurring items 11,412 (4,562) 15,143 (14,549)
Interest income, net 11,254 1,387 23,398 6,274
Minority interest and other, net (1,173) - (2,263) -
-------------------------- --------------------------
Pro forma net income (loss), before taxes,
excluding merger and acquisition-related
expenses and other non-recurring items 21,493 (3,175) 36,278 (8,275)
-------------------------- --------------------------
Provision for income taxes 8,597 138 14,511 138
-------------------------- --------------------------
Pro forma net income (loss), excluding merger and
acquisition-related expenses and other non-
recurring items $ 12,896 $(3,313) $ 21,767 $(8,413)
========================== ==========================
Pro forma basic net income (loss) per share,
excluding merger and acquisition-related
expenses and other non-recurring items $ 0.12 $(0.04) $ 0.19 $(0.09)
========================== ==========================
Weighted average shares used in computing
pro forma basic net income (loss) per share
excluding merger and acquisition-related
expenses and other non-recurring items (2) 110,400 89,810 111,695 88,960
========================== ==========================
These pro-forma consolidated financial statements exclude merger and
acquisition related expenses, including the amortization of goodwill and
non-recurring expenses and gains related to: a legal settlement, international
joint ventures and Lycos Ventures, L.P. They do not purport to be financial
statements prepared in accordance with Generally Accepted Accounting
Principles.
These pro-forma consolidated financial statements have been restated to
reflect the acquisition of Gamesville, Inc., accounted for as a pooling of
interests. Weighted average shares used in computing basic and diluted pro
forma net income per share for the three and twelve months ended July 31, 2000
include Lycos common stock from the conversion of Gamesville, Inc.
10
common stock and preferred stock on December 3, 1999, which is included as
outstanding for all periods presented, the conversion of Quote.com, Inc.
common stock, preferred stock and warrants on December 6, 1999, the conversion
of Valent Software Corporation common stock, preferred stock and options on
February 2, 2000, and the conversion of MetroSplash.com, Inc. stock options on
July 31, 2000.
11
LYCOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(In thousands except per share data)
Three Months Ended Fiscal Year Ended
July 31, July 31
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
(Unaudited) (Unaudited)
Revenues:
Advertising $ 56,919 $ 32,990 $ 191,653 $ 96,459
Electronic commerce and other 30,995 13,457 99,297 42,081
------------------------- --------------------------
Total revenues 87,914 46,447 290,950 138,540
Cost of revenues 14,194 10,032 52,800 29,273
------------------------- --------------------------
Gross profit 73,720 36,415 238,150 109,267
Operating expenses:
Research and development 13,319 8,771 47,352 26,963
Sales and marketing 41,902 24,272 148,768 79,325
General and administrative 7,337 7,934 31,781 17,528
Amortization of intangible assets 37,191 16,741 134,063 52,428
Total operating expenses 99,749 57,718 361,964 176,244
------------------------- --------------------------
Operating loss (26,029) (21,303) (123,814) (66,977)
Interest income, net 11,254 1,387 23,398 6,274
Minority interest and other, net (1,173) - (2,263) -
Equity share of losses in affiliates, net (20,651) (1,360) (32,407) (1,360)
Gain on sale of investment - - 270,237 10,119
------------------------- --------------------------
Net income (loss) before income taxes (36,599) (21,276) 135,151 (51,944)
------------------------- --------------------------
Provision for income taxes 2,891 138 114,146 138
------------------------- --------------------------
Net income (loss) $(39,490) $(21,414) $ 21,005 $(52,082)
========================= ==========================
Basic net income (loss) per share $(0.36) $(0.24) $0.20 $(0.59)
========================= ==========================
Diluted net income (loss) per share $(0.36) $(0.24) $0.19 $(0.59)
========================= ==========================
Weighted average shares used in computing basic
net income (loss) per share (1) 110,400 89,810 105,211 88,960
========================= ==========================
Weighted average shares used in computing diluted
net income (loss) per share (1) 110,400 89,810 111,695 88,960
========================= ==========================
(1) These consolidated financial statements have been restated to reflect the
acquisition of Gamesville, Inc., accounted for as a pooling of interests.
Weighted average shares used in computing basic and diluted net income
(loss) per share for the three and twelve months ended July 31, 2000
include Lycos common stock from the conversion of Gamesville, Inc. common
stock and preferred stock on December 3, 1999, which is included as
outstanding for all periods presented, the conversion of Quote.com, Inc.
common stock, preferred stock and warrants on December 6, 1999, the
conversion of Valent Software Corporation common stock, preferred stock
and options on February 2, 2000, and the conversion of MetroSplash.com,
Inc. stock options on July 31, 2000.
12
LYCOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(In thousands)
July 31, July 31,
2000 1999
------------ ----------
Assets
Cash and cash equivalents $ 640,064 $166,506
Accounts receivable, net 29197 25,830
Electronic commerce and other receivables, net 99640 119,872
Property and equipment, net 10689 7,726
Investments 419898 48,001
Intangible assets, net 544813 505,682
Other assets 8143 16,182
---------- --------
Total assets $1,752,444 $889,799
========== ========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $61,946 $ 24,692
Deferred revenues 128122 119,950
Deferred taxes 76255 138
Other liabilities 8407 5,549
Total liabilities 274730 150,329
---------- --------
Stockholders' equity 1477714 739,470
---------- --------
Total liabilities and stockholders' equity $1,752,444 $889,799
========== ========
(1) These consolidated financial statements have been restated to reflect the
acquisition of Gamesville, Inc., accounted for as a pooling of interests.
###