Lycos Latin AmericaTerra Lycos: Latin America challengesTerra Lycos stock chartTerra Lycos performance compared to that of NasdaqExhibit 2Terra Lycos network of companiesTerra Lycos’ management teamLycos MexicoLycos BrazilTerra MexicoTerra BrazilTerra Lycos - Latin America-At a Special Meeting for Lycos stockholders held on October 27, 99.4 percent of votescast supported the merger, clearing the way to finalize the combination of Terra Networks, S.A. and Lycos, Inc. The new company Terra Lycos is a global Internet network operating in 41 countries in 20 languages, reaching 91 million unique monthly visitors worldwide (see exhibit 1 for the company stock price and exhibit 2for a list of all the companies in the Terra Lycos network). The company is created with the mission of becoming “the most visited online destination on the world”. TerraLycos headquarters are in Barcelona, Spain but the operations headquarters are in Waltham, MA. Terra Lycos CEO is Bob Davis, former Lycos’ CEO (see exhibit 3 for Terra Lycos management team).The definitive agreement on the merge was reached On May 16. At that time the acquisition was valued at $12.5 billion when it was first announced, but the value of Terra Networks' American-listed shares plunged in recent months, cutting nearly $7 billion off the buyout price. Terra Lycos will launch with approximately $3 billion in cash, making it one of the world’s best capitalized Internet companies and is expected to have pro-forma CY2000 revenues of approximately $500 million.Terra Lycos aggregates services and local and international content from leading providers from around the world, and provides online advertising and marketing, e-commerce, and other Web services. Terra Lycos will hold the leading position in four of its eight primary markets. The company will lead the market in Canada, Korea, Latin America and the U.S. Hispanic market. Terra Lycos will be number two in Asia including Japan, number three in Europe, and number four in the United States. Moreover, Terra Lycos provides Internet access to more than five million customers throughout the world. The merger was sound for both Terra and Lycos’ board. Both companies complemented each other well and joining forces would create a global Internet player that could improve both companies market position. The company will also leverage its important partners in this combination. Bertelsmann, the third largest media company in the world, and Telefonica, terra’s major stockholder, a leading telecommunications company, will provide content, commerce and connectivity assets, providing a major market differentiator. The merging companies had different culture and business models. For the merger to be successful, Terra Lycos management team must overcome those differences. Lycos and Terra had different geographic focus. However, Latin America was the only geographic overlap. At the time of the merger, Terra had a strong presence in the region and a content-based model; Lycos, on the other hand, was creating the Latin America division. After, the merger, on the implementation phase, Terra Lycos had to define its strategy for Latin America and as Matt Martinez, Director for Lycos Latin America points it out, it’s not an easy task: “Terra Lycos focus is on profit. The financial markets are asking for it. For the Latin America Region we ask ourselves the same question as for every region: which model will produce higher profits? How do we create new sources of revenue? . But we also ask some new questions, unique for - This case was prepared by Sebastian Pereira. The case was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright c 2000 by the Massachusetts Institute of Technology Sloan School of Management1the region: What do we do with the two brand names? How should we organize for the region? Is a global model applicable to the region?”Lycos, Inc. (www.lycos.com)In 1994 Carnegie Mellon researcher Michael Mauldin devised a Web search engine and, using a name derived from Lycosidae (the Latin name for the predatory wolf spider), dubbed his invention Lycos. After purchasing the technology, CMGI subsidiaryCMGI@Ventures formed Lycos, Inc. in 1995 and appointed Robert Davis as CEO. Wasting no time, Lycos went public in April 1996 and gained more exposure the following year when it became one of the search services accessible from Netscape's search and directory page.On June 1997, Lycos and Bertelesmann AG created Lycos Europe, a localized version of Lycos site throughout Europe. Lycos Europe gets nearly 65% of sales from advertising; e-commerce and licensing make up the rest. It has been expanding by snapping up other portals, including Scandinavia's Spray and France's MultiMania. Lycos expanded to Japan in 1998 by teaming up with Sumitomo. In the same year, the company acquired Tripod (home page building – www.tripod.com), wisewire (directory building) and WhoWhere (directory services – www.showhere.com). The company expanded to Korea the following year, forming a joint venture with Mirae Corporation. Still in 1999, Lycos beefed up its Asia presence with the formation of Lycos Asia with Singapore Telecom and acquired Sonique (Internet music distribution – www.sonique.com), Quote.com (financial information web site – www.quote.com) and Gamesville.com (interactive entertainment company – www.gamesville.com).In 2000 Lycos launched Sympatico-Lycos, a Canadian business-to-consumer Internet portal, in partnership with Bell Canada. It also began offering free Internet access, created LycosLabs, which will finance Internet startups, announced a joint venture with Quack.com to develop a voice-accessed portal, and launched a co-branded automotive Web site with Autoweb.com (Lycos took a 10% stake in Autoweb).Prior to the merger, the company's Lycos Network was visited by nearly 31 million people each month and featured services such as Web searching, chat rooms, e-mail,online shopping, news, auctions, streaming video programming, and homepages. Thecompany also offered free Internet access. Nearly 70% of Lycos' revenue came from advertising; the company also generated revenue through e-commerce agreements with companies such as Barnes & Noble and AT&T, as well as through licensing agreements with companies including IBM and Packard Bell NEC.At the time of the merger, Lycos had about 900 employees in