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To: marquis103 who wrote (78442)	2/17/2000 9:12:00 AM
From: JDN	Respond to of 97611

Dear Russ: Well, I am going from memory, but I believe if CMGI were to be treated as an Investment Company all income and losses would have to be dividended out to the shareholders of CMGI. As to the 60 year old law, I never heard of it nor know anything about it. jdn

To: marquis103 who wrote (78442)	2/17/2000 9:51:00 AM
From: rupert1	Read Replies (1) \| Respond to of 97611

Russ: One of the reasons CMGI bought Alta Vista was that it needed to balance its revenues from passive investments with revenue from operations. Otherwise, CMGI would be classified as a mutual fund. Alta Vista was not to be a passive investment but active operating ownership. CMGI would operate Alta Vista and earn revenues and thereby avoid the problem. So after AV becomes a public company CMGI will need to continue to own and operate it. I don't know what percentage it needs. I would have thought that it could spin off or sell some more but must retain at least 51%. One of my subsidiary arguments has been that given the urgent need for CMGI to acquire an operating company, COMPAQ could have got a better deal maybe got cash or more cash than it did - or could have sold the whole of COMPAQ to CMGI. This would have been good for COMPAQ shareholders and would have given CMGI much more a margin of error for its SEC requirements. The bottom line is that for COMPAQ - the CMGI and AV holding is tied up in a number of ways. First there is the restrictions on COMPAQ on the sales of the shares, then the restrictions on CMGI on the quantity of shares in AV it can sell, then there will be new restrictions on when COMPAQ can sell its shares in AV after the spin off.

To: marquis103 who wrote (78442)	2/17/2000 11:00:00 AM
From: Night Writer	Read Replies (1) \| Respond to of 97611

DJN: WSJ(2/17): AltaVista Warns CMGI's Stake May Stop Acquisition By Jon G. Auerbach Staff Reporter of The Wall Street Journal Many Internet companies dream of being acquired for big bucks. But Internet portal AltaVista Co. might be forced to tell suitors to get lost. AltaVista, which is planning a public offering in the next several months, warns investors in its registration filing that a 60-year-old securities law may effectively prevent the company from being purchased after the IPO. Such a situation could make AltaVista, Palo Alto, Calif., a less attractive stock, because takeover speculation and industry consolidation are major factors fueling the current Internet stock fever. AltaVista, in a standard section of the filing devoted to "risk factors" facing the company, says its hands are tied because its 82% owner, Internet conglomerate CMGI Inc., Andover, Mass., may need to retain its majority stake to avoid being treated by the Securities and Exchange Commission as an investment company, or mutual fund. Such treatment would have onerous implications for CMGI, such as requiring the company to reincorporate itself and attain shareholder approval of employment contracts for top executives, according to SEC officials and securities lawyers. It would also be subject to impromptu SEC regulatory visits without court orders. CMGI acquired its stake in AltaVista from Compaq Computer Corp., Houston, in August -- after the IPO, CMGI will own about 74% of AltaVista, and Compaq will own about 16%. Alan L. Dye, a securities lawyer at Hogan & Hartson, Washington, said most companies avoid being treated like a mutual fund at all costs because of strict disclosure regulations and greater shareholder rights. David Emanuel, an AltaVista spokesman, said the filing "speaks for itself." CMGI's chief financial officer, Andrew J. Hajducky, said there is no risk of CMGI being treated as an investment company. "We are an operating company. Period." However, Mr. Hajducky said he hasn't "done the calculations" to determine if selling AltaVista would put CMGI above the law's threshold. Investment bankers have said that the threat of mutual-fund regulation is one of the forces impelling CMGI's recent desire to expand its operations through acquisitions such as AltaVista. Another reason to believe that CMGI will continue to be an aggressive Internet buyer is also disclosed in the filing. Under an agreeement between Compaq and CMGI, Compaq preprograms some of its keyboards with a button that says "Internet" -- and sends the computer user straight to the AltaVista site. This accounts for between 5% and 10% of AltaVista's traffic each month. However, the filing says Compaq can terminate the agreement if AltaVista drops below the No. 12 position for four consecutive months in Internet audience figures kept by Media Metrix Inc. Since June, AltaVista has slipped two spots to No. 12. To stay in the top 12, CMGI or AltaVista may have to grab more traffic by making more acquisitions such as AltaVista's recent purchase of financial Web site Raging Bull. Under the Investment Company Act of 1940, a corporation becomes an investment company if its investments represent 40% of the company's total assets, not including government securities and cash. For CMGI, the situation has arisen because its venture-capital operations have delivered huge returns in recent years, based partly on early investments in Lycos Inc., GeoCities and Engage Technologies Inc. CMGI had about $5.4 billion in total assets at the end of October and investment securities of about $1.7 billion. If CMGI's ownership of AltaVista drops below 50%, the company could break the 40% threshhold. In its filing, AltaVista said the SEC regulations might motivate CMGI to "maintain at least a majority ownership position in AltaVista, even if other stockholders of AltaVista might consider a sale of control of AltaVista." The government filing adds that CMGI's ownership may "have the effect of delaying, deferring or preventing a change in control of our company or discouraging a potential acquirer from attempting to obtain control of us." Such an action, AltaVista said, "could adversely affect the market price of our common stock." (END) DOW JONES NEWS 02-17-00 12:01 AM * end of story *