Jealousy and stock ideas are uncommon bedfellows, but I'm
jealous of Ken Lang and that jealousy led me to Terra Networks (TRRA:Nasdaq
- commentary
- research),
which I find a pretty compelling investment opportunity.
Ken and I were in
the same graduate school class but both left before finishing. I went to
work at HBO in the defining
period in my life. Ken left to start a company called WiseWire, which
produced a product that I could never figure out. Still, he sold the
company for $40 million to Lycos, a company started by another grad school
classmate of ours, Michael "Fuzzy" Mauldin. Ken then became CTO of Lycos
for a few years before relaunching his entrepreneurial career at 100x
Ventures and now at Lightspace, where he's CEO.
So that's what happened to Ken, but I find what's happened to Lycos
equally intriguing here. Terra Networks top-ticked the entire Internet
economy when it bought Lycos in mid-2000 for $12.5 billion. It then
assembled several popular but unprofitable sites to put under the Lycos
umbrella -- Matchmaker.com, quote.com and Hotbot, to name a few.
Then the company finally unloaded the entire umbrella (it was no longer
raining, so why not?) for $100 million to a Korean company, Daum
Communications The sale was completed in October 2004, and for this
bargain price Daum now has the seventh-most popular Web site, according to
comScore Media Metrix, and the stocks of the top six sites --
Google (GOOG:Nasdaq
- commentary
- research),
Yahoo! (YHOO:Nasdaq
- commentary
- research),
Microsoft (MSFT:Nasdaq
- commentary
- research),
Time Warner (TWX:NYSE
- commentary
- research),
AskJeeves (ASKJ:Nasdaq
- commentary
- research)
and InfoSpace (INSP:Nasdaq
- commentary
- research)
-- carry much higher valuations.
Meanwhile, the remaining company, Terra Networks, now 72%-owned by
Spanish telephone company Telefonica (TEF:NYSE
ADR - commentary
- research),
held onto Lycos Europe.
Terra, with its portals (it held onto Lycos Europe) and broadband
access throughout Europe and Latin America, has focused its business into
a potential buy. The company is the largest Internet access provider in
Latin America, with over 1.5 million subscribers in the region. Latin
America's 55 million Internet users represent only 10% of the population,
as opposed to the 68% penetration in North America. According to
Internetworldstats.com, Latin America's Internet users grew by 200% from
2000-04, compared with North America's 105%. The only region that grew
faster was the Middle East, which grew 227%.
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