The Motley Fool Take
CMGI
By Rick Aristotle Munarriz (TMF Edible)
December 8, 2004
Hey, have you heard about this hot stock called CMGI (Nasdaq: CMGI)? Its shares are up by 43% this week, and, no, this isn't an article from the 1999 archives.
Sure, you remember the old CMGI. The dot-com wunderkind that grew to prominence as a prolific Internet stock incubator had a great run before the market's appetite for cash-burning dot-com upstarts was fed up.
When CMGI did turn a profit, it was always the hollow one-time result of selling some of its ventures to Internet bellwethers like Yahoo! (Nasdaq: YHOO), Amazon.com (Nasdaq: AMZN), and America Online -- now part of the Time Warner (NYSE: TWX) family.
That's why when the company reported a quarterly operating profit on Monday the market took notice. It was the first time in nine years that CMGI mustered an operating profit. More importantly, this isn't your dot-com-bubble victimized CMGI either.
After its acquisition of Modus Media over the summer, CMGI can now be seen as a cash-rich supply chain management specialist. Sure, it's still got a few speculative irons in the venture capital fire, but just as Berkshire Hathaway (NYSE: BRK.A) can be viewed as a stable insurance company with a portfolio of non-related subsidiaries, CMGI is back to its SalesLink roots. That's not a bad place to be with the economy improving and companies willing to spend more to beef up their operations.
That kind of steady foundation is unlikely to generate the froth that powered CMGI to unrealistic gains a few years ago. However, it is giving the company worthy fundamentals to rest its hat on. Gross margins of 12% during the quarter may not sound like much, but it's a 50% improvement from the company's 8% showing a year earlier. Operating profits of $2.4 million during the period may not amount to much, but at least we're talking profits now. Revenues nearly tripled to $257.1 million during the quarter. Forget the heady growth as it was the result of swallowing Modus, but now we are talking about a company with an annual run-rate in excess of $1 billion.
So welcome in the new CMGI. It's not as sexy as the original, but ask any investor how it felt to ride the hottie storm and you will be told that looks aren't everything.
I guess I'm off now. I'm going to thumb through the Dot-Com University yearbook and see what CMGI's sweetheart Internet Capital Group (Nasdaq: ICGE) is up to these days. |
