[Street.com] CMGI: "We're going to get to that easy life again"...

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From: Linda (joelinda1@home.com)
Date: Sun Oct 15 2000 - 21:44:44 PDT


CMGI Chief Sees Net Growth Centering in Asia
By George Mannes
Senior Writer
10/11/00 10:21 AM ET

"Over there! Over there!"

That was, in essence, the tune that CMGI (CMGI:Nasdaq - news) Chairman
and CEO David Wetherell was singing Tuesday night as he kicked off a
Manhattan analysts' conference for his Massachusetts-based Internet
empire. And it was one of several themes, including consolidation and
profitability, that appeared likely to carry over to the daylong Wall
Street presentations that the operating company/venture investment
house had lined up for Wednesday.

Rallying the troops amid cratering Internet stocks, Wetherell told
his audience Tuesday night, "The Internet ain't dead yet. ... There's
tremendous growth still going on."

But, he said, most of the future growth will take place overseas,
particularly in Asia. That area of the world will be the
fastest-growing Internet market, Wetherell predicted, over the next ten
years. Europe is growing too, he said, but the Continent's many
languages and the difficulty of finding an appropriate multicountry
partner will make it a tough consumer market to win over.

Other promising areas, Wetherell said, include the enterprise market
and infrastructure for a multidevice Internet.

Wetherell, stung by criticisms that CMGI is far from profitability and
that he's a dealmaker, not a company operator, reminded his audience
that in the mid-1990s, before CMGI became the Internet phenomenon it
has become, Wetherell indeed operated it with positive cash flow and
profits. "We're going to do that again soon," Wetherell said with a
smile. "We're going to get to that easy life again."

Certainly, profits might lead to an easier life for CMGI shareholders.
Well off a split-adjusted 52-week high of $163.50, CMGI's stock fell
$1.19, or 5%, Wednesday morning to $20.38.

Next week or the following week, said Wetherell, CMGI would be
providing guidance to Wall Street about its financial targets for the
current fiscal year, which ends July 31, 2001. Already, CMGI has
predicted that four out of its five operating segments will be
profitable by the fiscal year's end, excluding noncash expenses.
"You will see we will make good on our promise to achieve
profitability," he said.

Wetherell also continued to make good on the plans announced a month
ago to boil the company's 17 majority-owned companies down to somewhere
between five and ten. Following the September announcement that
Internet infrastructure firm CMGion was acquiring instant message
firm Tribal Voice, Wetherell promised a merger of another two
majority-owned units for Wednesday. In that case, CMGIon acquired
Ad Force.

In fact, the only operating business line that Wetherell said might
have room for more than one business is "infrastructure and enabling
technologies," including CMGion, NaviSite (NAVI:Nasdaq - news) and a
few other firms. "The rest [of the business lines] I'd like to see get
down to one [company], personally, by the end of the fiscal year,"
Wetherell said.



At CMGI, Learning From Mistakes on the Net
By George Mannes
Senior Writer
10/12/00 7:14 PM ET

As Internet stocks crash down like a ton of bricks and mortar, CMGI
(CMGI:Nasdaq - news) is trying to make sense of it all -- and
convince investors it can shelter them from the debris.

At a conference with investors and analysts in Manhattan on
Wednesday, executives at CMGI -- a company smack in the middle of
the Internet and the dearly departed
venture-capital-to-IPO-money-printing frenzy -- had their own
explanations for what's going on in the sector.

First, let's survey some of the debris littering the landscape.
Yahoo! (YHOO:Nasdaq - news), the pride of the Internet, closed at
$56.38 Thursday, down $26 over two days and less than half of where
it was at the beginning of September. priceline.com (PCLN:Nasdaq
- news) closed at $18.64 on Sept. 26, the day before it warned
that it wouldn't meet analysts' estimates for the third quarter;
it's now at $5.19. TheStreet.com Internet Sector index is down
more than 34% since Sept. 1.

And let's not forget CMGI: At $18, it's well down from its early
September high of$49.13 -- not to mention its 52-week high of $163.50.

Bad News Bears

So what's going on? It's pretty simple, figures Peter Mills, managing
partner of CMGI's @Ventures venture capital unit. "Evidently, there's
no such thing as good news in this environment," he said, with a nod
to Yahoo!'s fall despite beating estimates for the third quarter.

That's a little simpler than the explanation offered by CMGI Chairman
and CEO David Wetherell. Informed by a conversation he says he had
with Securities and Exchange Commission Chairman Arthur Levitt,
Wetherell said Wednesday that the turn-of-the-year Internet boom
-- and subsequent bust -- was caused by all the cash pumped into the
U.S. money supply in advance of Y2K in the expectation that people
would be withdrawing huge amounts from ATMs for fear of a banking i
ndustry collapse. Calling the dot-com fallout "the real Y2K bug,"
Wetherell said, "It's too bad the millennium occurred when it did.
It could have waited a couple more years, as far as I'm concerned."

So much for economic theory. In the meantime, CMGI spent Wednesday
hammering in the message that its Net-based companies and investments
were not just sensible, but eventually profitable.

For some of the roughly 70 companies that CMGI either operates or in
which it has VC investments, the story indeed made sense. But for
others, it was just like the case with the rest of the Internet:
We'll just wait and see.


On CMGI's part, the most impassioned defense of its business came
near the close of its analysts' meeting, a semiannual event to which
reporters were invited for the first time this week.

In response to an attendee's acid observation that investors wanted
to see more reassurance about profits than certain CMGI companies had
shown, @Ventures managing partner Jon Callaghan asked his audience to
think not just about the companies making presentations, but also
about the quality of their revenues and the companies to which they
sold their products. The business-to-business e-commerce companies that
had just finished a panel discussion, as he put it, worked with
"customers whose names do not end in 'dot-com.'"

Callaghan added, "B2B and e-business is not really about the Internet.
... It's about automating business processes."

It was this nuts-and-bolts, getting-business-done type of stuff that
occupied most of the analysts' day. And that illustrates the strange
position that CMGI is in. It made its fame, and reaped some of its
biggest windfalls, from consumer-oriented, pure-play dot-coms like
Lycos (LCOS:Nasdaq - news) and GeoCities.

Out of Favor

But, as reflected by Callaghan's dot-com comment, those companies have
fallen out of favor. And, as highlighted by CMGI's recent
reorganization, a majority of present and future revenue is coming
not from consumer sites, but from companies CMGI is helping conduct
business over the Internet. All it has to do is make sure the market
understands that.

So executives at CMGI and the companies in its network spent much of
the day talking about business-oriented themes that they believe offer
real opportunities for growth and profits in the post-giddy Internet

One of those themes was getting companies to use the wireless
incarnation of the Internet not to create new businesses, but to
conduct current ones more efficiently.

A related field of dreams for CMGI is the multidevice Internet --
building an infrastructure that makes sense in a world of wireless
netphones, interactive TV and ever-more-personalized content.
That's the mission of CMGion, a company that CMGI hasn't until now done
too good a job of deciphering for outsiders.

But adding spice to the menu of let's-get-down-to-business presentations
was a dash of the old Internet that investors grew to love in 1999 --
New Economy business ideas that seem just a little wiggy. Exhibit A was
the disclosure by iCast, CMGI's self-described online entertainment
community and personal publishing company, that it plans to get into
the business of talent management with the help of a recently hired
record-industry veteran. You know -- find bands on the Web and earn 10%
of their revenues by getting them a contract with a record label.
"That is a very substantial revenue stream, but that is not something
which develops overnight," iCast CEO Margaret Heffernan told

Sounds like a mistake. But as executives readily acknowledged Wednesday,
mistakes are made. Investments and strategies don't work out. And
sometimes the hard-nosed professionals at CMGI get caught up in
Internet madness like everyone else.

For example, listen to Rod Schrock, CEO of AltaVista, the venerable
and useful search engine that, with great fanfare and millions of
marketing dollars last fall, tried to relaunch itself as a "media
portal." A year later, Schrock says, 93% of the people who came to
AltaVista's home page used it as ... a search engine.

"Conventional wisdom was that search companies had to evolve into
something else to be successful," Schrock says. "It turned out that
was wrong."


"Regarding the presidential election, the first candidate to offer
psychological therapy tax credits for Internet investors gets my vote."
    --StockTracker Daily

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