Potential IPO hounds who haven't yet been scared off by Google's projected triple-digit share price, or its total valuation in the mid-$30 billion range, have yet another reason to fret. Yesterday, one of Google's second-class rivals, Lycos, was sold by its parent, Terra Networks
For context, recall that when Terra Networks first offered to buy out Lycos in 2000, it bid $12.5 billion. Fast-forward just four years, and the company has lost about 99% of its value. (Why, even your average Kia doesn't depreciate that fast!)
There is one caveat to the depreciation story, but it's a small one. Before the sale, Terra stripped out $435 million worth of Lycos' European and U.S. Spanish-language assets, which it will hold onto at the behest of Terra's parent company, Telefonica SA
Now, as anyone who has used Lycos' email system can attest, the company is a truly substandard operation. I have an email account with the company myself, which I continue to use despite the site often being down inexplicably. The site's unpopularity causes spammers, who swarm to Yahoo!
Lycos' lack of quality may also explain why it has taken Terra so long to find a buyer at any price. Reportedly, the company has been trying to unload Lycos for about a year now. Interactive Search almost bit but instead got bought itself by Ask Jeeves
So bully for Daum. They got themselves a real Internet bargain here, even if it isn't exactly in mint condition. And good for Terra, too, for holding a successful garage sale. But potential Google investors should consider the Lycos sale an object lesson on what can happen when you pay too much for a company in a very competitive marketplace. What you may willingly pay $125 for today, you may be relieved to receive $1.00 for a few years later.
Fool contributor Rich Smith owns no shares in any of the companies mentioned in this article.