USA won't renegotiate Lycos deal

Diller's USA Network Inc. has been raked over the coals by investors for its proposed acquisition of Lycos Inc. Investors over-reacted to the deal, upset because they were not getting the same extremely high premiums for the company that other Internet firms have received, the USA Networks chief added.

"They looked at this deal and saw that the premium was tiny, and their expectations were dashed," he said today at the Jupiter Consumer Online Forum in New York City. Given time, they will come to see that the deal is valuable to them, Diller said. "Real businesses generate real profits by selling real products that real people need," he said. They also do it using a bit of what he called an "antique thinking."

"Retailers have this old rule. It's generally a good idea to sell things for more than you paid for them," he said, taking a swipe at the recent emergence of companies who have decided to sell products at little to no margins in the hopes of pulling in a customer base. Diller plans to take the next few weeks to explain the deal to investors, taking the company on a road show to investors, such as CMGI, the largest Lycos shareholder with a 20 percent stake. Some weren't waiting for the road show. Indeed, a representative quickly approached Diller from Fidelity, a Lycos shareholder, after his speech.

Diller is confident that USA's real assets will make his combined company win out in the future, Diller said in his speech -- touting the "old arithmetic:" making a profit versus the new math of sky-high valuations and equally high losses.