Terra Networks

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Terra Networks, S.A.

Type	? (NASDAQ:TRLY)
Founded	1999
Headquarters	Spain
Industry	Internet
Products	Web Portal Search Engine
Revenue	€ ? billion (2006)
Operating income	€ ? billion (2006)
Net income	€ ? billion (2006)
Employees	??? (2006)
Parent	Telefonica Group
Subsidiaries	Lycos, Inc.
Website	Official Site USA

Terra Networks, S. A., usually referred to as "Terra", is an Internet multinational company with headquarters in Spain. Part of Telefonica Group (the former Spain's public telephone monopoly and now one of the most important telecommunications companies in the world), Terra operates both as a web portal and/or an internet access provider in the U.S., Spain, and 16 Latin American countries. Terra was publicly traded on NASDAQ under the symbol TRLY and on the Spanish stock market under the symbol TRR.

Terra was founded in 1999 by Juan Villalonga, Telefonica's president between 1996 and 2000, and quickly turned into a major internet player through the aggressive acquisition of several local startups in main Latin American markets: Olé (Spain), Zaz (Brazil), Infosel (Mexico), Gauchonet y Donde (Argentina).

Terra has also created several vertical portals, like Invertia, a successful finance portal, and Educaterra (e-learning). It also has stakes in other internet ventures: Uno-e (online banking), Rumbo (travel), Atrea (real estate), Azeler (car selling), and Maptel (online maps).

In November 1999, still during the period known as the "Internet bubble", Terra had a high-profile IPO both in the U.S. and Spain, and its shares skyrocketed from an initial price of 11.81 euros up to 157.65 euros in just 3 months. After that, the price fell sharply until it reached 2.75 euros in October 2004. This process sparked a lot of public controversy in Spain, where thousands of small investors acquired shares of Terra during the boom. Despite this problematic image, Terra managed to hold leading positions both as a web portal and as an ISP provider in several countries, and specially in Spain.

In April 2000, Terra surprised the internet market with the acquisition of Lycos, the U.S. portal, in a stock swap valued at US$ 12.5 billion. By that time, Lycos was the third most visited portal in the U.S., according to Nielsen//NetRatings, and had a strong presence in key European and Asian markets. Specialists expected that the combination of Lycos with Terra's dominance in Latin America would create a powerful company, able even to challenge giants like AOL, Yahoo! or MSN. Lycos CEO Bob Davis was moved to the position of CEO of the combined company, from where he stepped down in January 2001, being replaced by then Chairman Joaquim Agut.

Part of the deal was also German media giant Bertelsmann, owner of a stake in Lycos Europe. In exchange for keeping the control over Lycos Europe, Bertelsmann agreed to spend US$ 1 billion worth in advertising at Terra Lycos through a five-year period. That spending was crucial for Terra to survive the times of the internet crash, when several Latin American-based internet companies like Qué pasa, Starmedia or El Sitio lost cash up to the point of filing for bankruptcy or being taken over by bigger companies.

In 2003 Bertelsmann executed an option to get itself out of the agreement, transferring to Terra's parent company Telefonica the obligation to keep the ad spending. Soon after that, Telefonica decided to get more control over Terra and launched an offer for shares of Terra still floating on the stock market. Although it granted Telefonica control over more than 70% of Terra's stock, the move was not successful enough to let Telefonica take Terra out of the public, as it was allegedly its objective.

During 2003 and 2004 Terra expanded aggressively into the paid content business, mainly in Spain, Brazil, and Chile, launching ventures with Disney and Spanish football clubs Real Madrid and FC Barcelona. It also started several entertainment services, including an online multiplayer gaming platform (Terra Games) and a digital music service (Terra Música Premium) similar to Apple Computer's iTunes.

In October 2004, following Telefonica's decision to re-focus their businesses, Terra sold Lycos to South Korean Internet portal company Daum Communications for US$ 105 million. Kim Faura was Terra's last chairman. Joaquim Agut was the previous one, and now he is chairman of Endemol, another Telefonica's company.

In February 2005, Telefonica announced its intention of taking full control of Terra by giving Telefonica' shares in exchange for Terra's remaining shares in the stock market. After this plan was approved by both Telefonica and Terra shareholders meetings, Terra's shares were finally excluded from the market on July 15, 2005.

From that moment, Terra Networks S.A. was merged into Telefonica S.A. and, therefore, disappeared from a legal point of view. A small portion of the former corporate headquarters became "Terra Networks Asociadas, S.L.U." (a new company) and local Terra operations (and assets) were transferred to local fixed-line Telefónica companies.