[Industry Standard] What's CMGI Worth?

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From: Gordon Mohr (gojomo@usa.net)
Date: Wed Aug 09 2000 - 17:04:26 PDT

Will CMGI's next earnings release "open the kimono" on the performance
of its internal units?


(CMGI's quarterly reports seem to come out 5-6 weeks after the
quarter-close, so this next one should arrive in early September.)

# August 7, 2000
# What's CMGI Worth?
# And for that matter, what is CMGI? After years of secrecy in its
# financial disclosures, the company vows to open the kimono.
# By Cory Johnson
# Remember when Internet stocks were young and bold, and CMGI (CMGI) -
# just a few years out of the gate - was the boldest of them all? It was
# back in early 1999, and CMGI was held up as one of the best-performing
# stocks over the last five years, having risen an unimaginable 6,933
# percent. Investors often didn't know what CMGI was - and didn't care.
# Many saw this Internet conglomerate as an Internet mutual fund, a
# one-stock sector.
# That was then, but this is hell. Shares of CMGI started the year at
# $128.44, but last Thursday were trading at $33.19, a precipitous 72
# percent fall. And, most intriguingly, the question that was once an ally
# to CMGI is now an anchor around its neck: Just what is CMGI?
# Finally, six-and-a-half years after its IPO, the Andover, Mass.-based
# company is trying to come up with a lucid answer to that question.
# "We're simplifying the story," says CMGI chief David Wetherell. "Our
# goal is to make it easier for the Street to keep track of how we're
# doing."
# As such, Wetherell is embarking on an ambitious twofold project. First,
# the company is revamping its financial-reporting methods. Second, CMGI,
# one of the Internet's most-active acquirers, is quietly shedding and
# merging its portfolio. "We started up about eight companies in the last
# 18 months, and acquired about 30," says Wetherell. "But now we're down
# to 17. So this isn't a new strategy - we just haven't made it public
# until now."
# It's an effort to clear the confusion surrounding the company. Where
# CMGI once reported only two revenue categories, Internet and
# fulfillment, it will open the kimono with its earnings report for the
# quarter ending July 31, breaking out revenues from five separate
# businesses.
# Wetherell has been arguing that his companies should be valued on their
# ability to generate revenue. And, God forbid, Wetherell says they'll
# soon be seen for their profitability. Four of the five segments that
# CMGI is introducing will be profitable by the end of the year.
# "The portals segment will be profitable by Q4," Wetherell says.
# "AtVentures and consulting are profitable now. Marketing will be
# profitable by Q4. E-commerce consists of SalesLink, which is profitable,
# and uBid (UBID) , which will be profitable by Q4."
# That could go a long way toward showing off CMGI's strengths - and its
# weaknesses. "At least two of these segments are out of favor:
# advertising and e-commerce," says Luke Fichthorn, an analyst at Lazard
# Freres, an underwriter of CMGI. "So this is a chance for CMGI to prove
# it has something growing like a weed. Until now, the approach has been
# 'I swear to God, this business is growing fast.' But now we'll be able
# to see it."
# To ensure Wall Street sees it, Wetherell says management will educate
# professional money managers about CMGI.
# The recent crack in the IPO window could also help CMGI. The planned
# offering of CMGI-owned AltaVista was delayed, but is more likely to go
# forward now that AltaVista says it will be profitable by year's end. A
# public offering is also imminent for CMGI Solutions, the company's
# profitable consulting arm.
# "The goal is to have the banking team done in the next few days," says
# Wetherell. "We're really pleased with that one and it's time to take it
# public. And it's time to do that with AltaVista. It was a bad market in
# the spring, and the summer is never a great market, so why not wait till
# the fall until it's closer to profitability?"
# It remains to be seen, however, whether investors will wait until CMGI
# is further along before going along for the ride.
# -----------------------------------------------------------------------
# Cory Johnson is an editor at large at TheStreet.com (TSCM) .

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