Re: [CBS Marketwatch] CMGi Completes a Long Dot-Bomb.

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From: Linda (
Date: Wed Aug 23 2000 - 18:29:28 PDT

Adam wrote:

<<My love affair with CMGi continues. How can you not love a company
whose stock runs up 16% in one day -- that's almost two billion bucks in
market cap, folks -- because of this news:>>

Adam, you don't think that was a wee bit of a short squeeze? :)
Here's another article, plus two more from a few weeks ago that
you might not have seen.


Patriotism: The Last Refuge of ... CMGI?
By George Mannes
Senior Writer
8/23/00 3:15 PM ET

CMGI's (CMGI:Nasdaq - news) Patriotism is admirable.
But it may not be worth $114 million.

The Internet conglomerate said Wednesday that
it would be spending at least $7.6 million per
year over 15 years for the right to name the New
England Patriots' new stadium "CMGI Field."
But the deal -- among the richest such
sports-venue agreements ever, on the heels of
recent stadium-naming deals involving the likes
of 3Com (COMS:Nasdaq - news), Pacific Bell
and Entergy (ETR:NYSE - news) -- raises
questions about what kind of audience CMGI is
playing to, and the cost-effectiveness of measures
it's taking to reach that audience.

Clearly, the deal to name the stadium will give CMGI a
lot more visibility than, say, the now-maligned strategy
of paying for a 30-second ad during the Super Bowl.
Between signs on scoreboards, at the stadium's main
entrance and on nearby roads and highways, CMGI will
get 2.8 billion ad impressions per year, estimates
CMGI Chairman David Wetherell. And that figure apparently
doesn't include other benefits of the deal, such as a
suite at the stadium and sponsorship rights to each
season's first home preseason game. (The payments
begin in 2002, when the new football field in Foxboro,
Mass., is slated for completion.)


CMGI says it will use the deal to promote its own brand
as well as the businesses of firms it controls or in
which it holds a majority stake. Those include the
advertising firm Engage (ENGA:Nasdaq - news) and the
AltaVista portal, whose IPO CMGI postponed after the
tech stock downturn earlier this year.

Measuring the benefits of stadium-naming deals is
difficult, but there are some positives -- at least
on the home turf. In a 1997 survey conducted by sports
marketing firm Performance Research, 90% of people
questioned could recall, without any prompting, the
corporate sponsor of their local sports arena. In
addition, the company found, 61% felt that a sports
facility named after a corporation was a positive
for their community.

It's another question, though, whether the deal with
the Patriots, the home team of Andover, Mass.-based
CMGI, will help the company build a national or
international audience. "We think we're going to get
a lot of national visibility out of this," says David
Andonian, CMGI's president of corporate development. The
Patriots have already introduced CMGI to the National
Football League, he adds.

CMGI says the agreement is only one step the company
is taking to build up CMGI as a national brand targeted
at both business and consumer audiences. (Wetherell
pointedly noted in the press conference announcing the
deal that CMGI's revenue was greater than Yahoo!'s
(YHOO:Nasdaq - news).) "This isn't the only or the
primary outlet for that national exposure," Andonian
says. He acknowledged, however, that the company
already has reversed itself on one of those other
efforts: Earlier this year, the company said it would
launch a loyalty program called CMGI Points, which
now uses a noncompany-specific name.

Other Ideas

One authority on stadium-naming deals, though, said
the deal didn't sound like a good way for CMGI to
build a national brand, and was wildly expensive to

"It's not enough to put a sign up and say, 'I'm a
sponsor,'" says Lesa Ukman, editor of IEG Sponsorship
Report, which covers sports, arts, entertainment and
cause-related marketing. Although CMGI might get
national exposure, the deal won't make it a national
brand, Ukman says. "You have no footprint in the rest of
the country," she says. "You're aligning with one team as
opposed to everyone's team."

Ukman said the market value of the exposure that CMGI
will get is worth perhaps half of what it's paying.
Better strategies for building a national audience among
consumers and business, she says, might include spending
money on hospitality suites at several different stadiums,
or creating promotions that more tangibly drive sales or
change people's opinions about one's brand.

If Ukman is right, at least CMGI has room for error. As
of April 30, the company had $2 billion in cash and
marketable securities on hand. Over the first nine
months of its fiscal year ended July 31, the company
reported $314 million in selling expenses; $7.6 million,
though certainly a lot of money, is a relative drop
in that bucket.

Hang It on the Stock

Uri Landesman, chief investment officer of CMGI shareholder
Fleck T.I.M.E. Fund, says he thinks the deal make sense
because it will help bolster CMGI's reputation as a stock.
The company has been hurt in the market, he says, because
the business-to-consumer sector, accounting for a significant
portion of the company's revenue, is out of fashion, and
because investors have turned on Internet stocks.

Standing Eight-Count?
CMGI 75% off year's high
Source: BigCharts

CMGI's stock has fallen more than 75% off its all-time
high of 163 1/2; on Wednesday afternoon, the stock was up 8%
for the day, trading at 40 3/4.

"Fairly or unfairly ... their reputation as an operating
company doesn't match what their reputation used to be as a
venture-capital company," says Landesman. "Cash isn't really
CMGI's problem. Perception is CMGI's problem. ... I'm happy to
see they're taking steps to turn the perception of the stock

What Is CMGI Worth?
By Cory Johnson
Originally posted at 12:30AM ET 8/7/00 on

SAN FRANCISCO -- Remember the good old days? We were young and bold,
Internet stocks were younger and bolder, and CMGI (CMGI:Nasdaq - news),
just a few years out of the gate, was the boldest of them all.

It was early 1999, and CMGI was held up as one of the best-performing
stocks over the last five years, having climbed an unimaginable 6,933%.
Investors often didn't know what CMGI was -- but they didn't care. To
many, it was a singular vehicle for Internet investment; they
saw this Internet conglomerate as an Internet mutual fund, a one-stock
sector, one-stop Internet shopping.

That was then, but this is hell. Shares of CMGI started the year at
128 7/16, but now trade at 37. And, most intriguingly, the question
that once propelled CMGI is now an anchor around its neck -- What
is CMGI? Incubator? Operator? Procrastinator? Instigator?

How The Mighty Have Fallen

CMGI trades for less than the sum of its parts, analysts say

Source: Lazard Freres analyst
Luke Fichthorn

Now, six and a half years after its IPO, management of the Andover,
Mass., company is trying to come up with a lucid answer to that

"We're simplifying the story," says CMGI Chief Executive David
Wetherell. "Our goal is to make it easier for the Street to keep
track of how we're doing."

Here's the Plan

As such, Wetherell is embarking on an ambitious twofold project. First,
CMGI is going through a wholesale restructuring of its financial
reporting. Second, CMGI, which has been one of the Internet's most
aggressive acquirers and incubators, has been quietly shedding and
merging the dozens of companies under its umbrella.

"We started 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 acknowledgment that no one could figure out just what the
company was up to. Prudential Securities analyst Paul Merenbloom, a
CMGI bull, humorlessly admits as much in his research notes on the
company, with the caveat "we value CMGI on a sum-of-the-parts basis
noting the impracticality of maintaining financial models for each
unit." (Prudential hasn't participated in underwriting for CMGI.)
In other words, if CMGI won't tell you how it's doing, there's no
way to figure it out on your own.

But the daze of confusion may soon pass. Where CMGI once reported only
two revenue categories -- Internet and fulfillment -- it's now going
to break out revenue from five businesses: advertising and marketing,
consulting, e-commerce and fulfillment, enabling technologies and
infrastructure and its well-known venture capital arm, @ventures.

"Our goal is to have no more than two businesses per segment," says
Wetherell. "Preferably, we'll see one. This all was done strategically
to build certain business in certain areas."

Is It an Incubator?

The most common misconception about CMGI is that the company is an
Internet incubator. In part, it's a victim of the successes of the
@ventures unit, whose progeny include Lycos (LCOS:Nasdaq - news)
and Ventro (VNTR:Nasdaq-news).

The incubator moniker is one Wetherell has been actively trying to shed
for more than a year, yet the market remains fixated on that aspect.
So when the initial public offering window slammed shut this spring,
incubators became incinerators, and the value of Internet Capital Group
(ICGE:Nasdaq - news), Safeguard Scientific (SFE:NYSE - news) and (XLA:Amex - news) plummeted. The debacle around the July
IPO of divine Interventures (DVIN:Nasdaq - news) seemed to seal CMGI's

But Wetherell has been arguing that his company should be valued on its
ability to generate revenue -- not IPOs. And he says the various
businesses are on their way to profitability.

"The portals segment will be profitable by Q4," he says. "@ventures and
consulting are profitable now. Marketing will be profitable by Q4.
E-commerce consists of SalesLink, which is profitable, and uBid, which
will be profitable by Q4. So four of those five segments will be
profitable by year's end." By showing profitable segments within the
company, CMGI is clearly hoping that it will benefit when compared
with unprofitable companies across the Internet aisle.

Showing Both Sides

Lazard Freres analyst Luke Fichthorn says that could go a long way
toward showing off CMGI's strengths -- and weaknesses. (Larzard is
a CMGI underwriter.)

"This is the first attempt to show the market that they are not a B2C
play," says Fichthorn. "At least two of these segments are out of
favor: advertising and e-commerce. So this is a chance for CMGI to
prove they have something growing like a weed. Until now, their
approach has been 'I swear go God, this business is growing fast.
' But now we'll be able to see it."

And to make sure Wall Street sees it, Wetherell says management is going
to make some trips to New York to try to educate money managers about
the company's story, as well as hosting an analysts' day in early
September. These events could provide some badly needed momentum for
the stock.

Ironically, the recent crack in the IPO window could also help CMGI. The
delayed IPO of AltaVista looms -- and is even more likely now that
AltaVista says it will be profitable by year-end. An IPO 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
to the fall until it's closer to profitability."

CMGI investors, however, are surely tired of waiting. And it's starting
to look like that wait may be over.

CMGI to change revenue reporting
Andover firm looks to downplay image of Net incubator

By Beth Healy, Globe Staff, 8/3/2000

In a bid to boost its stock value, CMGI Inc. plans to change the way it
reports revenues, downplaying its profile as an Internet investor and
emphasizing its operating businesses.

The Andover-based company disclosed its plan yesterday during a
high-tech investment conference in Boston. CMGI president Dave
Andonian told analysts at the event, ''There's absolute confusion
out there about what CMGI is.''

CMGI made its name investing in start-ups such as Lycos and reaping
windfalls when the companies went public. CMGI's shares soared 940
percent last year on investors' hopes that it would take dozens of
companies public. But its shares have plunged 75 percent this year,
as the IPO market cooled, prompting the company to try to change its

''It hasn't been [in] good favor to be an Internet incubator lately,''
Andonian said. ''Unfortunately, it seems that's where we've been put.''

CMGI owns 17 companies, including search engine AltaVista Co., and has
minority stakes in 60 others. The company's @Ventures group based in
California makes venture capital investments in young, private

In its next quarterly earnings report, CMGI will break out its revenues
into five sectors. They are venture capital, advertising and marketing,
e-commerce and fulfillment, infrastructure, and services. Currently,
there are only two revenue categories: Internet and fulfillment.

Steve Frankel, an analyst at Adams, Harkness & Hill Inc., which
sponsored yesterday's conference, applauded the move. He said CMGI has
been trying to sell Wall Street for the past year on the idea that it's
an operating company, not just a publicly traded venture capital firm.

''This is exactly what they need to do,'' Frankel said. ''I've been
looking at this operating company strategy, but without numbers to
back it up, it just doesn't work.''

CMGI shares closed at $35.1875, up 68.75 cents.

In its third quarter, ended April 30, CMGI posted a huge revenue gain of
417 percent, to $225.9 million. Its loss was smaller than expected, at
$1.53 per share instead of $1.83 per share, but the $428 million loss
marked a jump from $27.8 million in the prior quarter, as expenses

Spokeswoman Deidre Moore said the shift in revenue reporting reflects an
evolution the company has been making to more of an operating model. The
company says it never meant to let its venture activities overshadow its
Internet units.

''We should not be valued on the strength of the IPO market,'' Moore
said. ''We should be valued on our ability to generate revenue.''

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