Ad backtrack batters Terra Lycos stock
Bertelsmann may cut back on ads, services spending
In May 2000, Bertelsmann announced plans to spend $1 billion over five years in advertising and other services on Terra Lycos. A first, obligatory $325 million tranche, to be spent by October, has largely been placed, accounting for about one-third of Terra Lycos' ad revenues.
Tightening purse strings
But Bertelsmann appears to be pussyfooting over its option to spend the remaining $675 million, according to a story in the Financial Times.
"We will decide over the next months if and for which amount we will continue after October 2002," a Bertelsmann source is quoted as saying.
The declarations rocked Spanish markets: Many investors believed that Bertelsmann had a lock-solid commitment to spend $1 billion.
U.S. investors also registered their shock, dropping Terra Lycos more than 4% to $7.46 on the Nasdaq.
Bertelsmann's change of heart may not be entirely innocent: The German conglom could be looking for leverage in a bid to acquire assets from Spanish telco giant Telefonica, which controls 37% of Terra Lycos' equity.
Bertelsmann has made little secret of hankering for a stake in Telefonica's media subsid Admira, or the jewel in Admira's crown, Dutch TV behemoth Endemol. In addition, Bertelsmann in December raised its stake in the Admira-controlled Spanish broadcaster Antena 3 to 17%.
Bertelsmann's wavering over Terra Lycos could be a timely wake-up call to Telefonica as it preps the future of its subsids and affiliates over the upcoming year. Both Terra Lycos and Telefonica hold shareholder meetings next week.
(Emiliano de Pablos in Madrid and Justin Oppelaar in New York contributed to this report.)
