Davis steps down as Lycos chief exec

Terra Lycos gets a nerve-racking management shakeup
Written by Larry Dignan, Contributor and  Jim Hu, Contributor

Terra Lycos confirmed Thursday that chief executive Robert Davis was stepping down amid a top-level management shakeup. The company also topped estimates for the fourth quarter.

Investors have become increasingly skittish about Terra Lycos as a number of the company's competitors have warned of rough times ahead. The management shakeup couldn't have come at a worse time. Terra Lycos, formed from the merger at Terra and Lycos, is only three months old and facing a tough market environment.

The company reported a fourth quarter loss of 17 cents a share on sales of $164 million. Earnings tracking firm, First Call projected a loss of 22 cents a share on sales of $151m.

In the shakeup, Davis will step down as chief executive to become a non-executive chairman at the company. Davis will become a partner at venture capital firm Highland Capital Partners. Joaquim Agut will take the reins at Terra Lycos. Chief financial officer Ted Philip will become vice president of strategic planning and M&A. Elias Rodriguez-Vina will replace Philip as chief financial officer.

Davis's tenure was marked by his signature scrappiness that turned an obscure Web search engine developed at Carnegie Mellon University into a new media company. As the first employee at Lycos, Davis also shepherded the company through times of turmoil, from the embarrassing failed merger with USA Networks and the collapse of the Web stock bubble.

The rise of Lycos was largely marked by Davis' growth-at-all-cost attitude that kept the company afloat despite the difficulty in competing in the Web portal sector. Much of the company growth was fueled by acquiring smaller-scale Web companies, such as Wired Digital, Quote.com, Sonique, Gamesville and this week's purchase of Raging Bull.

But over the past couple of years, the leaders such as Yahoo, America Online and MSN got bigger and distanced their lead. The stragglers meanwhile either threw in the towel or have turned their attention away from competing with the top players. Just this week, Walt Disney announced it would shutter its Go.com Web portal and lay off 400 employees.

Just when it seemed Lycos would also fall into the turmoil that struck second tier portals, Davis sold the company to ISP Terra Networks, a subsidiary of Spanish telecommunications giant Telefonica. Given Terra's dominant footprint in the developing Latin American region, the acquisition was viewed as one possible answer to AOL's mega-merger with Time Warner. German media giant Bertelsmann pledged to buy nearly $1bn in advertising on Terra Lycos and supply the company with its content.

But a rift soon developed among top executives. When Terra and Lycos merged former Telefonica chairman Juan Villalonga had forged a power sharing pact with Davis. However, Villalonga was ousted in a boardroom coup shortly thereafter, and Davis had reportedly had differences with Joaquim Agut, the man Telefonica appointed chairman of Terra.

But don't cry for Davis. In October, Lycos' first employee sold more than 3.45 million shares in a transaction valued at about $72m at the time, according to regulatory filings.

As for the future of Terra Lycos, Agut has a lot of raw material to work with. Terra Lycos has $2.4bn in cash, a strong partnership with European media giant Bertelsmann and a good position as a global Internet player.

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