Stock Bull --
Or to put it in another way: If CMGI is to become, say, a $100B company in 3-5 years, how exactly is DW going to do it?
I think the question is well worth our time and consideration. But, ultimately, the business model that CMGI pursues offers growth potential that far outstrips a Home Depot or McDonald's. Yes, those retailers can grow quickly in a linear fashion -- adding stores and expanding product lines, etc. All terrific stuff and they've been great investments and I expect they will continue to be great investments (albeit in a safe, large-cap way).
With CMGI, I expect to see exponential, not linear growth. For example, $2 million in LCOS becomes $2 billion a couple of years later. The difficulty for many would-be investors, I think, is that one can't point to the specific investment or reason that will cause the explosive growth.
But, in general, investors are betting that somewhere within the 15 or so majority-owned companies or 50+ minority (@Ventures) investments, there lie a few more winners as well. And that somewhere within the synergy among those operating companies, there lies the foundation of a dominant Internet franchise. Growth? I don't see that as a a challenge -- except in controlling it!
I may hate this analogy phrasing because it sounds like a Ponzi scheme -- which it definitely is NOT, but think of this as a pyramid. We started at the top some time ago -- 1994-95 with Booklink. That netted, what, $70 million? That got invested in various companies in 1995 and that has netted (through GCTY and LCOS, among others), what, $3 billion or so?
Now, three levels down the pyramid, we've got major winners in Engage, Navisite, Chemdex, Critical Path (OK, pretty small amount there) and others.
Then, we fan out and we start taking the proceeds to buy even more companies -- the Ad companies, Alta Vista, etc.
My point is, CMGI has continually parlayed its successes into a new level of hypergrowth. And fortunately, they're in a space where hypergrowth is possible for some time to come.
They don't need to grow from 50 companies to 500 in order to grow 10 times their current size. They just need a couple of the 50 to pop spectacularly. Sure, that's a big "if/but." However, given their track record, it's a bet I and many others are willing to take.
Scarecrow |
