Staying the Course at CMGI

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http://www.thestreet.com/_yahoo/tech/internet/1025111.html

> Staying the Course at CMGI
> By George Mannes
> Senior Writer
> 8/2/00 11:24 AM ET
>
> Times are tough for Internet venture capitalists. But they're still
> an @Venture for Jon Callaghan and CMGI (CMGI:Nasdaq - news).
>
> Shares of CMGI, which rode the frenzied Internet IPO wave over
> the past year -- thanks to its investments in dozens of privately
> held Net companies, a number of which have come public -- have
> plunged nearly 80% as investors have grown pessimistic about
> returns on early-stage Net investing. The stock, which hit an
> all-time high of 163 1/2, fell nearly 9% Tuesday to close at 34
> 1/2.
>
> Other publicly traded venture operations that have been
> victimized by the cold water thrown on the IPO market include
> Safeguard Scientifics (SFE:NYSE - news) and Internet Capital
> Group (ICGE:Nasdaq - news), off 70% and 85% from their highs,
> respectively. Internet incubator divine Interventures
> (DVIN:Nasdaq - news), which finally went public last month after
> a pre-IPO process that seemed nearly soap-operatic, is trading
> just below its offering price.
>
> But Callaghan, newly elevated to become one of the four managing
> partners of CMGI @Ventures, the venture capital arm of CMGI, says
> the firm is readjusting its tactics in response to the new state
> of the IPO market. "We are becoming more selective," Callaghan
> says. "And we understand it's going to take more capital over
> time. ... You don't have public markets playing venture
> capitalist anymore.  ... We need to do that privately now."
>
> In addition, just like virtually all of the privately held
> Internet companies unaffiliated with CMGI, the ones in the CMGI
> fold are settling in for an indefinite time period when they
> won't be able to tap the public markets for cheap capital.
> Companies in the CMGI venture portfolio are trying to slash the
> rate at which they're burning cash by cutting down on new hires,
> or in some cases by laying off people, he says.
>
> A Little Surprise
>
> CMGI did and didn't foresee the recent carnage in Net valuations,
> Callaghan says. Over the past 18 months, the company expected
> some sort of "consolidation and shakeout" in the Net market. But
> he didn't figure out the timing, he says.  Nor did he foresee the
> magnitude. "Quite frankly, we're surprised by the severity and
> velocity with which it happened."
>
> But CMGI's venture affiliate is, of course, still open for
> business. Domestically, the firm has about $3 billion to invest,
> including subspecialties such as business-to-business and
> emerging technologies. (An additional $1.5 billion is slated to
> go to international investments in conjunction with Hong
> Kong-traded Pacific Century CyberWorks and the investment firm
> Hicks Muse Tate & Furst.) As for the now-reviled consumer
> segment, CMGI is still investing in it, says Callaghan, but he
> adds, "I think it's going to be harder across the board for the
> consumer business models."
>
> Like other Net investors, Callaghan sees big potential for growth
> in wireless, but not overnight. "The installed base is huge," he
> says, and the expected numbers of people who might use wireless
> devices to communicate and conduct transactions are "just
> staggering" -- equivalent to a second Internet. But he suggests
> that the different generations of standards spreading out through
> the industry are hampering market growth. "That may mean that
> mass adoption occurs within the next three years, or maybe the
> next five years," he says.
>
> In the meantime, CMGI investors are likely waiting for signs of
> life from the IPO market, which might translate into an IPO for
> majority-owned AltaVista (which actually isn't part of the
> @Ventures portfolio). Plus, they're looking for better news
> coming out of venture investments like retailer Furniture.com,
> whose recent difficulties have included a Boston Globe article
> focusing on a spate of consumer complaints directed at the
> e-commerce site.
>
> "There are situations that will work, and there are some that
> will be tough times," says Callaghan, declining to comment
> specifically on Furniture.com. "I think we've shown in a lot of
> situations our true nature: We're in it for the long haul."

http://biz.yahoo.com/rf/000802/n0297572.html

| Wednesday August 2, 7:03 pm Eastern Time
|
| AltaVista sees profits within 2 quarters
|
| PALO ALTO, Calif., Aug 2 (Reuters) - The Internet search service
| AltaVista Co said Wednesday it was rapidly reducing its losses
| and expected its U.S. operations to become profitable on an
| operating basis within the next two quarters.
|
| The company, which postponed a planned initial public offering in
| April because of weak market conditions, said it will probably
| complete an IPO around the same time it becomes profitable. A
| spokesman for the company declined to be more specific about the
| time frame but suggested it was likely the IPO would occur before
| year end.
|
| ``Without giving too much away on timing, we think that
| profitable companies are rewarded handsomely in IPOs,'' the
| spokesman said.
|
| His comments suggest a shift in thinking from earlier this year,
| when AltaVista had been planning on going public as a
| money-losing operation. ``I think we're responding to the
| marketplace,'' the spokesman said, referring to investors'
| increased focus to profits in recent months. ``The (IPO) is more
| likely when we are profitable.''
|
| AltaVista, majority owned by the internet incubator CMGI Inc
| (NasdaqNM:CMGI - news), said its U.S. operations had an operating
| loss of about $30 million during the fourth quarter ended July
| 31, on revenues of $70 million. The company has an extensive
| presence overseas, but says the bulk of its revenues are
| generated in the U.S.
|
| The latest quarterly results compare with a third quarter
| operating loss of $40 million on revenues of $58.2 million.
|
| The company spokesman attributed the reduced loss to better
| overall expense management, but he said AltaVista had not
| undertaken any dramatic cost cuts.
|
| He said the company has trimmed its marketing budget, but is
| still spending aggressively to promote the site. After a round of
| layoffs earlier this year, the company is again in hiring mode,
| he said.

slightly older:

http://biz.yahoo.com/ii/000713/magic25c_000713.html

] Thursday July 13, 12:28 pm Eastern Time
]
] Individual Investor
] CMGI Bounces off Lows, But Remains Way Oversold
]
] Research Director: David Sterman (07/13/00)
]
] In the last month, shares of CMGI (NASDAQ:CMGI - news) plunged
] from $60 to $35, leaving investors to ponder ``what the heck is
] going on here?'' A strong rally in the broader market on
] Wednesday helped shares rebound somewhat, but they still remain
] well off of their highs.
]
] To be sure, the stock has few near-term catalysts, especially as
] the IPO market remains moribund. But as noted in a recent update,
] CMGI continues to execute its business model right on plan. After
] all, CMGI has integrated eight major acquisitions over the last
] year, without skipping a beat.
]
] And with $350 million in cash (and another $6 billion in stock of
] other companies), coupled with the fact that the company's $30
] million monthly cash burn rate is declining, CMGI is clearly
] well-funded enough to survive and flourish through the next
] industry upturn.
]
] Prudential Securities's Paul Merenbloom, who rates the stock a
] Strong Buy, recently did a back-of-the-envelope valuation of the
] business model. Several months back, he figured the stock was
] worth $216. Since then, a number of CMGI's public stakes have
] come down in value. In addition, Merenbloom figures the private
] companies have taken similar valuation hits.  Nevertheless, the
] analyst thinks the stock is worth $155-which is more than triple
] current levels.
]
] That target is quite intangible. But the point is well-taken that
] the stock is highly undervalued on a sum of the parts basis. And
] it's important to remember that the lion's share of CMGI's recent
] investments have not even begun to bear fruit. Investors should
] buy the stock with a 2-3 year time horizon in order to lock in
] eventually strong gains.
]
] Updated July 13, 2000 with CMGI trading at $44.88.  Recommended
] 12/10/99 at $97.03
]
] (Magic 25 is a diversified portfolio of stocks that Individual
] Investor believes will outperform the market over the course of
] the year. In 1999, the Magic 25 portfolio was up 79.3%. On
] average the portfolio has risen 31.6% annually.)


--
Gerald Oskoboiny <[email protected]>
http://impressive.net/people/gerald/

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