Battered but unbowed, CMGI chairman still has swagger
By Tim McLaughlin
ANDOVER, Mass., Dec 19 (Reuters) - CMGI Inc. (NasdaqNM:CMGI - news) Chairman David Wetherell has survived the aftermath of the dot-com implosion, a corporate jet with a balky engine, and the wrath of shareholders who questioned his leadership.
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And even though CMGI's stock has sank to about $1.60, erasing much of the billions in shareholder wealth seen in early 2000, Wetherell on Wednesday showed flashes of the swagger he once used to catapult the Internet investor and operator into Nasdaq's stratosphere.
``(Merrill Lynch analyst) Henry Blodget said last year we would be out of cash in six months,'' Wetherell told about 160 shareholders at CMGI's annual meeting. ``I wish I would have predicted (Blodget) would be out of a job in 12 months.''
That Wetherell is still around to zing Wall Street analysts says a lot in an industry that decimated scores of dot-com darlings. CMGI's stock closed at $163.22 a share in Jan. 2000, when Wall Street analysts such as Blodget, who recently left Merrill Lynch, hyped unprofitable Internet firms.
Wetherell conceded, however, bluster alone won't change Wall Street's mind about CMGI, or boost its shares.
``We need to focus on pure, hard-core results,'' he said.
But CMGI has given investors plenty of reason for pause. An accounting glitch, described by CMGI last week as a math error, understated the firm's fiscal 2001 net loss of $5.37 billion, or $16.34 a share, by $110 million, or 2 percent.
When asked about the error by a shareholder, Wetherell downplayed the mistake.
``The good news is that the $110 million (in writeoffs) is no longer on our balance sheet,'' Wetherell said.
Another investor wanted to know when CMGI would turn profitable, using Generally Accepted Account Principles, or GAAP, but CMGI Chief Financial Officer George McMillan could not provide an estimate.
``I can't give a forecast on that,'' McMillan said.
CMGI said it will reach break even on a pro forma operating basis -- which excludes depreciation, amortization, asset impairment, and restructuring costs -- in the first half of fiscal 2003.
BURN RATE
Shareholders also expressed concern about CMGI's cash burn rate. CMGI burned through nearly $60 million in cash during its fiscal first quarter, which ended Oct. 31. The company, however, expects to cut its quarterly burn rate in half and exit fiscal 2002 with more than $250 million in cash.
``We have enough cash for at least a couple of years even if the cash-burn rate remained the same,'' Wetherell said.
CMGI's restructuring during the past year has reduced to nine from 17 the number of CMGI majority-owned operating companies. Companies left standing include search engine AltaVista, Web auction site uBid.com, Web hosting firm NaviSite Inc. (NasdaqNM:NAVI - news), and Engage Inc. (NasdaqNM:ENGA - news).
At Wednesday's close, Engage shares were trading at 48 cents and NaviSite shares were trading at 32 cents.
CMGI shareholder Gary Mucica praised Wetherell, who owns 38.1 million shares, for not unloading the stock during its steady decline and for cutting his own annual pay to $1.00 from $530,000.
``He stuck with the stock through thick and thin,'' Mucica said.
Wetherell said the restructuring is behind the company, which is now ready to grow after shedding properties that relied too much on Internet advertising.
Jeffrey Gaglione, a teacher who bought CMGI shares at $18, said he is sticking with CMGI because it might be one of the few Internet firms that survive.
And these days, Wetherell is looking like a survivor.
Earlier this year, he endured two engine failures, one over the Atlantic Ocean and another on a trip back from the U.S. West Coast, when his $23 million corporate jet stalled at high altitude.
He wants to return the plane to its maker and get his money back. This is an option investors such as Gaglione do not have.
``There's no sense selling now,'' he said. ``The stock's too low.'' |
