CMGI Hires Hint at Online Media Move
By George Mannes of thestreet.com
Staff Reporter thestreet.com
2/24/99 12:35 PM ET
CMGI (CMGI:Nasdaq) is on a hiring spree.
The company, which operates as a venture-capital fund as well as a direct-marketing firm, has embarked on a string of management hires to prepare the ground for a big push into online media and publishing.
On Monday, CMGI announced the appointment of William Hawkins, a 20-year veteran of the software industry who spent the last four years at America Online (AOL:NYSE). Hawkins is being appointed to the newly created post of president of Internet technology.
The addition follows other recent high-level personnel changes at CMGI and its various operations. Last week, the company announced it had recruited Neil Braun, former president of NBC Television Network, to launch a new company devoted to Internet broadcasting. In addition, the company said it was moving Hans Hawrysz, president of CMGI's majority-owned subsidiary Planet Direct, to the new post of president of strategic planning for CMGI. And it filled Hawrysz's spot at the helm of the Internet miniportal with Jeffrey Cunningham, former group publisher at Forbes.
To one observer, the various additions are a sign that David Wetherell, CMGI's chairman and CEO, is acknowledging the growth of the company's operations and investments and preparing for further expansion. "People have said to him for a while, 'How are you going to manage all this? You need more talent. You need more executive talent,'" says Ken Winston, analyst at Needham & Co.. "Now he's doing that." Winston, whose firm has no investment banking relationship with CMGI, rates the company a buy, his firm's second-highest ranking.
Says Bill White, president of Internet group marketing for CMGI, "You're seeing a strengthening of the management team and the infrastructure to foster the type of growth we've seen."
CMGI combines majority-owned operations in direct-marketing and Internet-related companies with venture-capital investments in numerous Internet companies. Driven by the success of its investments in companies such as Lycos (LCOS:Nasdaq) and GeoCities (GCTY:Nasdaq), CMGI reported net income in its latest fiscal quarter of $38.6 million, or $1.54 per diluted share, compared with $2.6 million, or 12 cents per share, one year earlier -- even though its operating losses grew to $19.9 million from $12.2 million.
That success has driven CMGI's stock, split-adjusted, up more than tenfold from a year ago. CMGI's shares, which have traded as high as 155, rose 2 13/16 to 117 1/2 on Tuesday.
"It's a company that's had a successful strategy," says Bill Bass, an analyst at Forrester Research. "Just like any other investment vehicle, all you need is one big hit." Since December, CMGI has been busy spending money in the CMG@Ventures III venture-capital fund it manages, the third and largest VC fund it has run in the brief commercial history of the Internet. CMGI has raised $272 million from limited partners, including Microsoft (MSFT:Nasdaq) and Microsoft co-founder Paul Allen's Vulcan Ventures. Already the company has announced seven different Internet investments, including Boston Financial Network and Furniture.com.
"You can see we're quite active," White says.
Hawkins, who CMGI says will provide "strategic counsel and technical vision" to the company's Internet investments, is not a stranger to CMGI or to Wetherell. In 1994, Hawkins was chief technical officer of CMGI's then-wholly owned subsidiary, BookLink Technologies, an Internet browser developer that CMGI sold to AOL for $30 million of AOL stock.
Hawkins declined a request to discuss his new role at CMGI. But one of the areas in which he'll presumably be helping is the unnamed Internet broadcasting venture headed by Braun and bankrolled with a startup investment of $100 million. "The mission is to become the most usable, and that is to say, the most used, audio and video portal on the Web," Braun says.
Braun isn't talking about what type of programming he'll showcase in the new operation, which is slated to launch by midyear. He indicates it will include entertainment for which there might be a large audience on the Internet, but not big enough to be economically transmitted as a conventional broadcast, cable or satellite channel. "There's a very long list of things I've developed, which I believe have very strong audience appeal," he says.
Though it's reasonable to conclude Braun will be going after the Internet-broadcasting market led by broadcast.com (BCST:Nasdaq), Braun avoids a combative stance. "We're not setting out to replicate what they're doing at all," he says. "There's enough room on the Internet for a lot of good ideas. I'm not specifically targeting any company as in, 'This space I want to own,'" he adds.
Needham's Winston says that Braun and Cunningham, along with John Federman -- a former PC Week publisher named CEO of CMGI's ADSmart Internet advertising network last fall -- would be a big boost for the company. "Now he's got three pretty heavy media guys who really know the media advertising business and the offline business," he says. "That's really going to help him go to the next level with these companies."
But Bass points out that the company's investment strategies make it just as vulnerable as other Net companies to market downturns. Lycos shares fell sharply after it agreed to a deal that will merge the company with the assets of USA Networks' (USAI:Nasdaq) Home Shopping Network. Bass says, "At some point, these Internet companies have to grow up. ... At some point, these Internet companies have to turn into real assets. And if the market penalizes them for that, this is a real house of cards."
He adds, "That's not a lick on CMGI. ... That's a lick on an ungodly frothy market right now."
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