Mark, Zen, others...any comments on this article I just discovered...??
<<February 3, 2000 2:20pm
2HRS2GO: ICG not a CMGi clone
By Sergio G. Non 22GO ZDII
SAN FRANCISCO -- Hearing the co-founder of Internet Capital Group (Nasdaq: ICGE) reminded me of the fast-talking guy in those FedEx commercials from the 1980s.
"And that was on decaffeinated coffee."
"I think he drank a whole pot."
"Did he take a single breath in that whole time?"
You could have provided a day of electricity for the entire Bay Area with the nervous, almost frantic energy thrown off by Kenneth Fox during his presentation yesterday at the Banc of America Securities Technology Week 2000 conference here in San Francisco. As head honcho of ICG, Fox probably needs every bit of it to fuel his ambition to become Your B2B Overlord.
When ICG went public last year, many observers likened it to a CMGi wannabe. CMGi's own CEO, David Wetherell, not so long ago complained his company wasn't getting the valuation of ICG.
Next thing you know, NASCAR ace Jeff Gordon will compare salaries with F1 star Michael Schumacher. Naturally, any racing fan would dismiss that as absurd; both guys drive cars, but their jobs have nothing in common.
You can say the same thing about CMGi and ICG, if Fox's description of his firm is accurate. ICG and CMGi invest in Internet firms, but that's where the similarity ends.
CMGi nurtures content companies like Lycos (Nasdaq: LCOS), Web media specialists like Engage Technologies (Nasdaq: ENGA), or the occasional Internet technology provider. There's some overlap with ICG, but the latter largely spends money on unsexy firms like plastics industry distributor Commerx, supply chain software vendor Syncra Systems, or soon-to-be public cattle specialist eMerge Interactive (Nasdaq: EMRG).
Speaking of IPOs, you can count on CMGi to either sell its companies or guide them toward an IPO. That's how CMGi makes money. Contrast that with Fox's attitude:
"When things have value, we hold them in perpetuity."
General Electric (NYSE: GE) stands as Fox's model. GE commands large market shares in each of its major businesses, whether it's media, appliances, electrical products, financial services or power plants. And most of GE's companies are business-to-business.
ICG envisions itself as the GE of the Internet -- all of ICG's holdings are B2B companies. "We are a next generation holding company," he said.
Fox has ICG targeting the 50 largest global business markets, with the goal of owning 33 to 85 percent of the top online firms in industry. "This is the cheapest time to buy market share," Fox believes.
Between 1996 and 1999, ICG's annual spending on acquisitions rose to $319 million from $14 million.
I'm not sure how ICG brings all these companies together in a coherent operation, but then again, how many people outside of Jack Welch and his inner circle can explain GE's diverse operation? The difficulty hasn't stopped GE stock from rising steadily throughout Welch's tenure.
ICG says it provides services, management expertise and board guidance, and sharing of best business practices to its holdings.
Also worth noting are two advantages Fox didn't bring up: the security of being in a larger organization; and most appealing, a fat check for the acquisition target's owners.
What about fat profits for the investors who have driven ICGE shares into the stratosphere? Currently ICG's stock value (like CMGi's) is based on its assets, Fox noted. Four or five years from now, Fox said, ICG will be valued on its cash flow. So presumably (that's my presumption, not Fox's statement) ICG will generate at least an operating profit by 2005.
ICG hasn't been around publicly traded long enough to fairly judge its performance, but it's hard to disagree with the basic strategy.
Unfortunately for those who want quick-hit-profit-now results, you'll have to wait awhile for the full fruits of this garden. "Our agenda here is not to take a company public, our strategy is to build a market leader 10 years from now," Fox said.
Let's just hope Fox can keep his energy up for that long.>>
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IMO, DW and his team have much more experience incubating worldclass internet firms. CMGI also has a more well developed Ecosystem / EcoNet of firms (which are all stronger because they work together). CMGI also has better fundamentals, a more reasonable valuation, and more operating experience than ICGE. This is just my opinion. ICGE is a good company but I feel that it has been hyped a little too much. Then again, I could be wrong. There is plenty of room in the B2B sector and internut incubation sector for a couple of strong players. It will be interesting to see if CMGI has the premium valuation a few years from now <VBG>....I'm NOT going to bet against DW and his team.
Best Regards,
Scott |
