CMGI - Boston Herald commentary
Where CMGI goes - MSGI (with CMGI/GE Capital onboard) is sure to follow!!
Looking forward to Ed Mullin's arrival in just three weeks. I can't begin to explain how reassuring it is to have a guy who knows his stuff as President. IMO the strength of the management team is the key factor leading to success for ANY stock.
Message 9127930
I've bold faced the last paragraph.
David :)
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Net result: CMGI's strategy pays off
by Todd Wallack
[ Thurs, April 22, 1999 ]
CMGI Inc. isn't just another Internet play. It's the mother of several Net stocks.
The Andover company owns stakes in popular Web sites like Lycos and GeoCities. It has started companies that do everything from providing phone lines to tracking millions of Internet users for advertisers. Recently, CMGI pledged $100 million to start an Internet broadcasting company.
Altogether, CMGI has started or invested in more than three dozen companies - forming a powerful family that covers a broad range of technologies.
''I've heard it compared to a kind of mutual fund or publicly traded venture capital firm,'' said Daniel King, an analyst at LaSalle St. Securities in Chicago. ''We see them as a strategy play, because they are such an industry leader.''
Unlike most companies, CMGI doesn't really worry much about total operating profit or revenue.
Instead, it tries to nurture its investments along and cash in by selling them or taking them public.
CMGI executives expect several ventures to go public this year, with more in the pipeline for 2000. And they plan to invest in two to four new companies a month.
''We're seeing no shortage of opportunities,'' said Chief Executive David Wetherell.
Wall Street certainly seems to share the enthusiasm.
As of early April, CMGI shares had grown to 14 times their value 12 months earlier. A dollar invested in CMGI four years ago, when it traded at a split-adjusted 67 cents a share, would be close to $400 as of April 9.
Other Net stocks have skyrocketed, too. But lately CMGI stock has grown faster than that of America Online Inc. and Yahoo! Inc. And CMGI has hit some home runs.
For instance, the company stands to make $1 billion when Yahoo buys GeoCities, a deal that's been pending since earlier this year. Another one of its investments, Critical Path Inc., went public last month, when CMGI owned a 7 percent stake. By early this month, Critical Path had a market value of $3.4 billion.
Now, investors are looking for more - ''The kind of investment where you put a few million in and pull a billion out,'' said King. He wouldn't be surprised if five more CMGI firms go public this year, he said.
Already, Silknet Software of Manchester, N.H., has registered with the Securities and Exchange Commission to sell shares to the public. It makes customer service software that's designed to take advantage of the Web. CMGI owns 24 percent of Silknet.
In addition, two wholly owned subsidiaries in Andover have chosen investment bankers to help take them public: Engage Technologies, which creates profiles of millions of Internet users to help companies better target their electronic ads, and NaviSite Internet Services, which started out as CMGI's internal computer support department and now provides similar services to others.
But IPOs are always a gamble, so CMGI's stock tends to be more volatile than most. It's not unusual for it to jump or fall more than 10 percent, even without any specific news. ''To some degree, CMGI tracks other stocks, but on an exaggerated basis,'' King said.
CMGI wasn't always so wild. Wetherell built the company around a direct marketing firm called College Marketing Group, which he bought in 1986.
But CMGI took a radical turn in 1994, when Wetherell invested less than $1 million in a tiny Internet browser company called Booklink Technologies. Less than a year later, Wetherell sold it to America Online Inc. for $30 million in stock, which he soon sold for $72 million.
Then Wetherell did it again. He took the money and invested in ventures like Lycos and GeoCities. Not every investment, of course, has been a winner. CMGI had to scrap a free e-mail company called Freemark.
But analysts generally give CMGI good marks for making smart picks and helping them grow.
The company has already raised three venture capital funds and is considering opening a fourth, with a pool of between $500 million and $1 billion aimed at late-stage start-up funding.
Wetherell estimated that CMGI receives 1,000 business plans a month from entrepreneurs. (He has found some investments on his own, like Raging Bull, simply by surfing the Web.)
Recently, though, CMGI has been snarled in controversy over its most successful investment, Lycos, which it helped start in 1995.
Waltham-based Lycos, which runs a network of popular Web sites, recently agreed to merge in a complicated deal with USA Networks Inc., which is run by media mogul Barry Diller.
Lycos would gain key assets, such as Ticketmaster and Home Shopping Network, in exchange for stock. Though analysts praised the deal, many complained Lycos was getting shortchanged.
Enter Wetherell, who sat on the Lycos board and initially supported the deal. After watching Lycos stock plunge, he reversed course and began lobbying to stop the deal.
Wetherell has also courted other prospective buyers. Ultimately, some say, Diller may have to sweeten the terms to keep the agreement together.
''I think it is undervalued,'' Wetherell said of Lycos. Diller, meanwhile, has pointed out that CMGI sold Lycos shares for far less than the $90 range that spurred Wetherell to object.
Regardless of what happens, though, CMGI had already made hundreds of millions on its Lycos investment. Now, it's hoping to do the same with other new Net companies.
[ My bold face ] |
