Gateway Forms Alliance With CMGI,
Investing $200 Million for Small Stake
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Gateway Inc. formed a broad alliance with CMGI Inc., a company with stakes in hot Internet start-ups, to share development ideas, customers and products.
The deal is another in a series of moves by personal-computer makers to use online services to boost their revenue and profit.
"We're looking at this as an operating partnership," said Gateway Chief Executive Ted Waitt. "There are a tremendous number of ways we can work together." Initially, Gateway and CMGI may jointly offer such services as Web hosting and Internet access for Gateway customers, he said.
Laurie Orlov, a senior analyst at market watcher Forrester Research Inc., said the agreement "is yet another example of a company that sees its future in owning its customers through services, not product. The Internet is the ultimate way to make that happen."
Gateway Plans Shopping Site, Buys Stake in Online Retailer (Feb. 25)
Gateway, North Sioux City, S.D., may create business units around new services and products being developed, he said. As part of the agreement, Gateway will invest $200 million in CMGI, obtaining a stake of about 1.5% in the Andover, Mass., company, which was an early investor in GeoCities (later sold to Yahoo! Inc.) and Lycos Inc.
In addition, the two companies may set up a venture-capital fund to invest in Internet start-ups, Mr. Waitt said. Such funds "are an option for the type of things we plan on doing together," said Mr. Waitt. Indeed, CMGI itself is often viewed as an Internet investment fund because of its stakes in such start-ups as Planet Direct, ICast, NaviSite and Activerse.
CMGI's chief executive, David Wetherell, said the two firms "share a common vision of the future of the Internet. It's about providing strong content, building powerful relationships ... and using the Internet as a powerful vehicle for marketing products and services."
Gateway, meanwhile, has significantly boosted its role in online work this year. The PC maker recently acquired a minority stake in an e-commerce firm to create its own online-shopping site. It also was a pioneer in offering its own Internet-access services to PC buyers.
Its moves mirror those by rivals such as Dell Computer Corp. and Compaq Computer Corp., which earlier this year acquired Internet-content and online-sales units.
CMGI shares closed down $1.6875 at $238.0625 in Nasdaq Stock Market trading Thursday. In New York Stock Exchange composite trading, Gateway shares closed down 56.25 cents at $67.625.
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