Forbes.com / Market Scan
CMGI Shows Signs Of Life
Matthew Kirdahy, 03.22.07, 1:30 PM ET
The way CMGI stock has been running harkens investors back to the days before the dot.com bubble burst at the dawn of the new millennium.
CMGI stock, a hot ticket in the late 1990s into early 2000, got a mega boost this week from a healthy earnings report, hopeful guidance and a positive news story.
CMGI shares jumped for the second straight session Thursday, up 19 cents, or 9.9%, to $2.11 at midday, a new 52-week high, in heavy trading. That's a nice gain, but a far cry from the company's statrospheric levels during the Internet bubble. It traded above $153 in January 2000 but was below $1 over the summer of 2006.
The company began life as an Internet incubator, helping to finance small tech companies then trying to bring them to market. A notable success was the Alta Vista search engine, but CMGI, which featured several consumer-oriented companies in its portfolio, was battered in 2000 when the frenzy for all things Internet abruptly ceased.
CMGI is still in the incubator business, but it also has moved into supply-chain management for technology companies. The latter line is bringing improved results
In the company's second quarter, which ended Jan. 31, sales gained a modest 1.9%, to $324.7 million from $318.8 million a year earlier, but CMGI went from a loss of $6.3 million to a net profit of $35.8 million, or 7 cents a share. Of particular interest to investors, the company's gross margin rose significantly, to 12.5% from 9.5% in the previous year, indicating it is increasing the profits it makes on each dollar of sales.
CMGI attributed that improvement to "strong volumes in Asia from certain higher-margin programs, improved work mix in the Americas and new business wins and productivity gains in Europe."
The balance sheet also is improving. CMGI said it had working capital of approximately $319.4 million at the end of the latest quarter, up 23.0% from $259.7 million a year earlier. Of that, cash and short-term securities rose 68.7%, to $275.0 million.
For the current financial year, CMGI said it expected sales of $1.0 billion, which would be a little less than the $1.1 billion of last year. But it expects its gross margin to improve from last year's 9.9%.
The company got a positive review in Barron's over the weekend. The articlesuggested that Federal Express parent FedEx or United Parcel Service might find thelogistics business of interest. That set off a swirl of commentary in the blogosphere this week, where the memory of CMGI's heyday seems brighter than the dismal performance of its stock for most of the time since. Also drawing attention was a small investment by its incubator unit in a waste-to-ethanol producer.
CMGI is not the only Internet dinosaur whose shares are perking up. Internet Capital Group, whose stock traded above $4,000 on a split-adjusted basis at the height of the Internet craze and as low as $3 thereafter, is now trading at about $10.70. Safeguard Scientifics, an $80 stock in 2000 and an 80-cent stock in 2002, has crept up to the $3 range amid improved prospects for its incubating holdings. |
