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At CMGI, Wetherell Stresses Bloodlines Over Bottom Lines
By George Mannes
Staff Reporter
4/20/99 12:17 PM ET
David Wetherell has been working hard to get his message out. Now the question is whether the market will listen.
In a two-day conference with investors and analysts last week, followed up by a breakfast meeting with the New York InfoTech Forum, the chairman and CEO of CMGI (CMGI:Nasdaq) tried to explain why the company is more than just a stock picker with a bag full of Internet holdings coming to market. The key, he says, is that these companies benefit not only from CMGI's cash, but also from the other companies in which CMGI has a stake. In other words, these fledglings gain in value from being added into the CMGI stew.
And that's why CMGI is worth more than the asset value of the companies in which it has a stake, Wetherell says. "You can't just add up the sum of the companies," he says. "It's OK to do that with one or two companies," he says, but not when it comes to CMGI, which has invested in 38 companies -- and counting.
The established companies owned by CMGI can improve business conditions for the newcomers to the group, Wetherell says. "We have these wholly owned business units that can help popularize what they're doing." He cites the example of Ancestry.com, a family-targeted Web site in which CMGI announced an investment in February. The company is getting site-hosting services from NaviSite, advertising sales from ADSmart and a syndicated presence on Planet Direct -- all majority-owned subsidiaries of CMGI.
Wetherell says the appeal of being in CMGI's family has enabled him to do deals on better terms than what other venture capitalists might get. The crucial part, he says, is persuading people that the price they get from CMGI is not as important as the price they'll get from other investors down the road, once CMGI has helped them grow.
Certainly, the supply of new business opportunity is in no danger of drying up; Wetherell says the company is getting more than 1,000 business plans a month and is making two to four investments a month through its @Ventures venture-capital affiliate.
In the past few days, though, the pitch hasn't helped CMGI's stock. From an intraday high of 330 last Tuesday, the start of CMGI's investor conference, the stock has fallen nearly 40% to around 200 as of Tuesday, along with other Internet stocks. But Wetherell last week shrugged off the movement. "It's a sector thing," he said. "You just keep your head down and build the business. ... Stock prices take care of themselves over the long term."
Of course it helps that despite the drop, CMGI's stock is up more than 200% since the beginning of the year.
At the conference, CMGI's family values got through loud and clear to attendees like Steven Appledorn, senior portfolio manager with CMGI shareholder Munder NetNet fund. Referring to the Japanese word used to describe an interconnected group of companies, Appledorn reported from the conference, "That's certainly been a focus -- the positive synergies of the keiretsu."
Investors are impressed with CMGI's previous successes with investments in GeoCities (GCTY:Nasdaq) and Lycos (LCOS:Nasdaq). (Wetherell isn't expanding on his previous objections to Lycos' deal with USA Networks (USAI:Nasdaq).) "In my opinion, they've really improved the odds of repeating. It's much less random than I first would have thought," says David Brady, a senior portfolio manager working on several funds at Stein Roe Mutual Funds, including the Young Investor fund.
Asked last week why he hadn't invested in CMGI, Brady said, "It's been a mistake. I wish I had. I guess I'll just wait for an opportunity." He said one of his concerns was that with the stock so far up from its 52-week split-adjusted low of 16 5/8, there was plenty of room for the stock to fall if current shareholders were to take profits. |
