OT: Red Herring Article About CMGI's Earnings Hiccup...
EARNINGS UPDATE: CMG DISAPPOINTS; WHAT'S NEXT?
By Peter D. Henig
June 11, 1998
CMG Information Services (CMGI), a onetime Wall Street unknown which found Internet stardom just a few short months ago, laid an egg on Thursday, announcing third quarter earnings that were a 45 percent surprise to the downside.
The company, which acts as a portfolio of sorts for Internet startups -- albeit one that attempts to create synergies among its Web-oriented offspring -- reported net revenues of $20.4 million for its third quarter ended April 30; a 15 percent sequential increase in quarterly revenues, but still a net loss of $11.7 million or $ 0.55 loss per share.
According to both Zack's Investment Survey and First Call, the analysts -- all four of them -- had been expecting a loss of only 38 cents per share.
Wall Street must of seen this coming because, according to Zack's, as of 90 days ago the consensus EPS was only $-0.20. Suddenly, 60 days and then again 30 days ago, the consensus dropped to $-0.38, and then it dropped again to $-0.52 only 7 days ago. This poor performance mirrors recent weakness in CMG's stock, as the company saw its share prices fall from highs of 53 3/4 during mid-May to lows below 35 by the beginning of June, as the entire Internet sector of stocks took a nosedive along with it. The loss of 55 cents was almost exactly even with the year-ago third quarter, where EPS losses were 54 cents.
Although kind enough to share his time, analyst Paul Noglows of Hambrecht & Quist seemed none-too-thrilled to talk about CMG's results.
"I would consider it an improving quarter," said Mr. Noglows. "I think we're seeing further evidence of operating synergies in their portfolio of investments, particularly with Encipiter and Engage, but given that this thing trades like a mutual fund, I don't think quarterly results are all that relevant."
Although Mr. Noglows is correct in questioning the relevancy of the quarter's earnings numbers given the complexity of CMG's business model, quarterly results are still the barometer by which Wall Street measures most public companies. And in the public's mind, poor earnings numbers -- particularly ones that have disappointed two quarters in a row (according to Zack's, the January quarter's loss of 61 cents missed by 13 cents to the downside) are usually not taken lightly.
Mr. Noglows placed little importance on the fact that CMG owns less than half of Internet Web portal Lycos (LCOS) after a recent selloff of a million shares in Lycos' secondary offering. And many analysts and traders on the Street are pointing to a highly anticipated GeoCities public offering, which appears imminent, to provide the next jump in CMG's stock. GeoCities is one of 21 companies funded or created by CMG.
Mr. Noglows no-commented his way through questions about a GeoCities IPO, so much so that we smell a Hambrecht & Quist underwriter participation in the offering. But who are we to say?
Other upcoming earnings announcements include Solectron (SLR) on Monday, June 15, Jabil Circuit (JBL) on Tuesday, June 16, and Oracle (ORCL) on Wednesday, June 17.
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