Subj: NetStock! by Steve Harmon 1999.09.17 CMGI vs. ICGE, Unscrambled
Date: 09/17/1999 4:34:12 PM Eastern Daylight Time
From: steve@e-harmon.com (Steve Harmon)
Sender: netstock-report-admin@listserve.com
To: netstock-report@listserve.com
___________________________
e-harmon.com's
NetStock! by Steve Harmon
ceo of e-harmon.com
"for the internet investor"
e-harmon.com
___________________________
Shortly after going public a few weeks ago Internet Capital Group (ICGE)
surpassed CMGI (CMGI) in market value. September 16 ICGE was $9.3 billion
market cap vs. CMGI's $7.8 billion. Justified?
Observers tossed up the usual buzz words and said ICG was more
business-to-business. Let's unscramble the alphabet venture soup here and
see if there's anything other than a noodle tease at play here.
Company CMGI Internet Capital
Ticker CMGI ICGE
Mkt cap $7,786 $9,295
TTM sales $148 $6
TTM earnings $56 $32
Ratios
Mkt cap/sales 53 1,583
Mkt cap/earn 140 289
Estimated
company/all assets
value* $11,250 $8,750
Number of wholly-owned 45 35
or portfolio companies
Harmon's estimated
value gap between 250 250
PMV and public 69% 106%
note: pmv=private market value or what each firm's assets could be worth
fairly valued
____
While business-to-business is hot and should command a premium as a sector,
that doesn't mean that underlying valuation and potential can be ignored,
or that ICG wins by marketing.
We can pick apart each of the firms' portfolios but rather than play
"dot-com" what ifs we can use a statistic approach combined with historical
investment acumen to determine a broader based view of CMGI vs. ICGE. On a
generic $250 million per unit the value adds up quickly for both firms yet
shows.
Not just a factor of the number of investments, however, what each firm has
done in the past 4 years also matters.
My analysis indicates that taking CMGI's operating and investments all
together could be valued at my estimated $11.25 billion. Plenty of B-2-B in
there and B-2-C (consumer) also.
The key difference is platform and track record. CMGI has pulled off
stadium-cheering moments with Lycos (LCOS) and GeoCities (now part of
Yahoo). It still owns 18% of LCOS. Now consider also AltaVista, one of the
top sites and services in the world for Web users, which CMGI just acquired
from Compaq. It ranks in the top 10-12 any given month according to Media
Metrix.
CMGI owns about 80% of Engage (ENGA), with a market cap of $1.6 billion.
Between AltaVista and Engage I find $3.6 billion of value. Half what CMGI
trades for and we haven't discussed its 40 more investments.
Focusing on ICG, using a generic value per each of its 35 investments I
come up with $8.75 billion valuation for ICGE. Which means that September
16's market cap was a 6% premium to what I think ICGE could or "ought" to
be valued at. Again, this median public/private market valuation factors
some stars and duds in its portfolio.
Both firms are portfolio driven with quarterly results that make
predictions meaningless on the revenue side. Whatever the market mood for
IPOs, acquisitions and mergers have more direct bearing on CMGI and ICGE,
with more influence on the latter one.
ICGE announced September 16 a loss of $11 million for the quarter ended
June 30. Unpredictable. For example, 2Q 1998 ICGE posted $6.7 million net
income when it realized gains on investing in VerticalNet (VERT).
VERT's the only thing ICG has to its credit so far, and I've always
believed that the promise of VerticalNet and the delivered results have
been two different things.
VERT is a home run and feather in ICG's cap but not a grand slam in the
industry. In other words, VerticalNet is not yet a hit in its sector as
measured by revenue and users.
VERT's market cap September 16 hit $1.1 billion. ICGE owns a small piece.
Even if it owned it 100% that's still not big enough of a blip.
GeoCities, in contrast, was a grand slam and Lycos was a paltry million
dollars parlayed into several billion by CMGI. Millions of users each.
Engage is a more recent example of value created.
More than buzzwords or following the herd, the numbers tell the story so
far, just not in the market caps being reflective of the results so far.
Both have potential but soup to nuts it's time for alphabet soups CMGI and
ICGE value gaps to get unscrambled.
*****
may be posted or published for non-commercial use, 100% intact with
attribution
*****
_________________________________________________
(c) 1999 e-harmon.com, inc.
This analysis may be shared for non-commercial purposes 100 percent intact, with proper copyright and attribution.
Disclaimer: e-harmon.com does not make specific trading recommendations or give individualized market advice. Information contained in e-harmon.com's NetStock! is provided as an information service only. e-harmon.com recommends that you get personal advice from an investment professional before buying or selling stocks or other securities. The securities markets and especially Internet stocks are highly speculative areas for investments
and only you can determine what level of risk is appropriate for you. Also, users should be aware that e-harmon.com, its employees and affiliates may own securities that are the subject of reports, reviews or analysis in NetStock!. Although e-harmon.com obtains the information reported herein from what it deems reliable sources, no warranty can be given as to the accuracy or completeness of any of the information provided or as to the results obtained by individuals using such information. Each user shall be responsible for the risks of their own investment activities and, in no event, shall e-harmon.com or its employees, agents, partners, or any other affiliated entity be liable for any direct, indirect, actual, special or consequential damages resulting from the use of the information provided.
_________________________________________________
To SUBSCRIBE please visit e-harmon.com
To UNSUBSCRIBE please send a blank email to
unsubscribe-netstock@e-harmon.com
|
