Hey! Who unplugged the incubator? I mean, it's getting awfully dark and lonely in this Internet venture capital space. Brrrr. It's cold, too. Mommy? Blanky?
As the all-but-forgotten warming plate to the Net's fallen stars, one would expect that CMGI (Nasdaq: CMGI) would have a hard time winning you over right now. After all, the best way to become a dot-com millionaire lately is to start off as a dot-com billionaire.
But, I don't hear anyone belittling the medium itself. You can't whistle by the grave site of what isn't dead. The Internet, as your eyes see before you, is alive and well. It's the funky business models and the irrational exuberance that has gone obit city. Fine. CMGI might have been dinged in the process of the mercy killing, but it's actually in much better shape now, with the froth blown clean off.
The online promise of convenience and experience personalization remains as true today as it did before wired stocks became a penny-stock minefield. Investors just have their fingers crossed behind their backs when it comes to faith in specific entity viability. Fancy that. All dot-com stocks were great before. Now even the quality names are rubbish.
We are essentially back to where we were a few years ago, with a few more shades of jaded colored in. We can't deny the Internet revolution, yet we're too consumed with the risk to appreciate the bounty that awaits the victors. It's a shame, because researcher Jupiter Media Metrix (Nasdaq: JMXI) still expects consumers to spend $86.3 billion online come 2003 -- four times what was spent last year -- to say nothing of corporate spending. Those still standing are going to get thicker slices. CMGI should know; it expects revenues to grow by 80-90% in fiscal 2001 to about $1.7 billion.
At this point, you might think that I'm trying to trick you into the lonely bullish camp. After all, if I can take you back to just before CMGI became one of the best-performing stocks over the last half of the 1990s, and use the same broad strokes of uncertainty, maybe I'll deliver the goods on a rarely duplicated ground-floor opportunity.
It's worth a shot. For this, I think it's important to know how CMGI got this dot-com bent in the first place. Back in 1994, the company sold Booklink and Navisoft to America Online (NYSE: AOL) for $30 million in AOL stock. The shares appreciated. The company was able to parlay those profits into different companies. Those shares appreciated. CMGI became a money hydra -- fiscal guppy breeding grounds, if you will.
So, a small chunk of the AOL proceeds -- just $6 million -- went into GeoCities and was eventually worth billions after Yahoo! (Nasdaq: YHOO) bought up the place. When the IPO market runs tepid, or if CMGI just finds an offer too good to pass on, it will find a buyer outright as it has in selling properties to AOL, Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN), and eBay (Nasdaq: EBAY) in the past.
Invest a little, nurture a lot. CMGI quickly became the place to go for seed money and a warm wing to nestle under. Even when times were good, CMGI didn't hit them all out of the park. That's not what it's all about. With such amazing homers, it was hard to fault its slugging percentage, but now it's a whole new ball game. Or is it?
If you think it's hard for cash-strapped publicly traded companies to raise capital right now, imagine how rough it's been for the private ones. Behind every dot-com that goes belly up, before or after market, there is a string of angry sugar daddies who have sealed their lips for good. Yet, this rather unsettling scenario might be one of the best things to happen to CMGI.
How so? For starters, as valuations swan dive and burnt competitors flee, the bargains are there for the VC taking. CMGI's buck will go much farther today than it did during frenzied times in the past. CMGI can also be more selective about which marked-down deals it wishes to consider -- if it considers any at all.
It's already sifting through its own portfolio to see which plants are worth watering and which are better off weeded out. CMGI is cash-rich, with $1.2 billion in cash and short-term investments as of mid-November. CMGI's got the candy every e-company wants. So, it's not just a matter of CMGI having $80 million to help out a company such as hosting specialist NaviSite (Nasdaq: NAVI). It is doing so with sober precision and at rock-bottom prices, with all the power to dictate the terms.
That is why the company still expects to hold about $700 million in its vault by the end of fiscal 2001. CMGI is not about to abuse the fire sale. It is going to stock up on flame-retardant clothing and ride out its most promising players. It expects four out of its five operating segments to be cash-flow positive by the end of this year, too. The lone exception -- Infrastructure and Enabling -- is also probably the easiest to forgive, given the eventual payout of the online realm's potent plumbing.
Right now, at a $3 billion valuation, CMGI is trading for little more than what it paid for its majority stake in AltaVista last year. Buy AltaVista, get CMGI free? Not even. Back out the cash and you're getting a big piece of AltaVista free too. Yes, AltaVista, the global powerhouse where less than half of its 65 million monthly users live stateside. It actually trumps $22 billion Yahoo! in places such as Italy.
CMGI has an attractive portfolio, for the most part. Over the weekend, Barron's noted how eBay might be making a play for the company's uBid auction site. Deals are still being done, handsome returns are still there to be had, they're just not always of the IPO variety right now.
In sum, today's gloom and doom and market demand for corporate performance is what makes CMGI such a compelling win-win situation. If Internet stocks march back into favor, history repeats and it's 1995-1999 all over again.
If the sour sentiment lingers, regardless of whether the sum of CMGI continues to trade for well below its collective parts, what will you have? A cash-rich company trading at barely 1x year-ahead sales on an enterprise value basis. A growth company with a knack for picking tomorrow's superstars, today. A ground-floor opportunity, again.
Hop in. Aim high. You might never get that third chance.
As the all-but-forgotten warming plate to the Net's fallen stars, one would expect that CMGI (Nasdaq: CMGI) would have a hard time winning you over right now. After all, the best way to become a dot-com millionaire lately is to start off as a dot-com billionaire.
But, I don't hear anyone belittling the medium itself. You can't whistle by the grave site of what isn't dead. The Internet, as your eyes see before you, is alive and well. It's the funky business models and the irrational exuberance that has gone obit city. Fine. CMGI might have been dinged in the process of the mercy killing, but it's actually in much better shape now, with the froth blown clean off.
The online promise of convenience and experience personalization remains as true today as it did before wired stocks became a penny-stock minefield. Investors just have their fingers crossed behind their backs when it comes to faith in specific entity viability. Fancy that. All dot-com stocks were great before. Now even the quality names are rubbish.
We are essentially back to where we were a few years ago, with a few more shades of jaded colored in. We can't deny the Internet revolution, yet we're too consumed with the risk to appreciate the bounty that awaits the victors. It's a shame, because researcher Jupiter Media Metrix (Nasdaq: JMXI) still expects consumers to spend $86.3 billion online come 2003 -- four times what was spent last year -- to say nothing of corporate spending. Those still standing are going to get thicker slices. CMGI should know; it expects revenues to grow by 80-90% in fiscal 2001 to about $1.7 billion.
At this point, you might think that I'm trying to trick you into the lonely bullish camp. After all, if I can take you back to just before CMGI became one of the best-performing stocks over the last half of the 1990s, and use the same broad strokes of uncertainty, maybe I'll deliver the goods on a rarely duplicated ground-floor opportunity.
It's worth a shot. For this, I think it's important to know how CMGI got this dot-com bent in the first place. Back in 1994, the company sold Booklink and Navisoft to America Online (NYSE: AOL) for $30 million in AOL stock. The shares appreciated. The company was able to parlay those profits into different companies. Those shares appreciated. CMGI became a money hydra -- fiscal guppy breeding grounds, if you will.
So, a small chunk of the AOL proceeds -- just $6 million -- went into GeoCities and was eventually worth billions after Yahoo! (Nasdaq: YHOO) bought up the place. When the IPO market runs tepid, or if CMGI just finds an offer too good to pass on, it will find a buyer outright as it has in selling properties to AOL, Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN), and eBay (Nasdaq: EBAY) in the past.
Invest a little, nurture a lot. CMGI quickly became the place to go for seed money and a warm wing to nestle under. Even when times were good, CMGI didn't hit them all out of the park. That's not what it's all about. With such amazing homers, it was hard to fault its slugging percentage, but now it's a whole new ball game. Or is it?
If you think it's hard for cash-strapped publicly traded companies to raise capital right now, imagine how rough it's been for the private ones. Behind every dot-com that goes belly up, before or after market, there is a string of angry sugar daddies who have sealed their lips for good. Yet, this rather unsettling scenario might be one of the best things to happen to CMGI.
How so? For starters, as valuations swan dive and burnt competitors flee, the bargains are there for the VC taking. CMGI's buck will go much farther today than it did during frenzied times in the past. CMGI can also be more selective about which marked-down deals it wishes to consider -- if it considers any at all.
It's already sifting through its own portfolio to see which plants are worth watering and which are better off weeded out. CMGI is cash-rich, with $1.2 billion in cash and short-term investments as of mid-November. CMGI's got the candy every e-company wants. So, it's not just a matter of CMGI having $80 million to help out a company such as hosting specialist NaviSite (Nasdaq: NAVI). It is doing so with sober precision and at rock-bottom prices, with all the power to dictate the terms.
That is why the company still expects to hold about $700 million in its vault by the end of fiscal 2001. CMGI is not about to abuse the fire sale. It is going to stock up on flame-retardant clothing and ride out its most promising players. It expects four out of its five operating segments to be cash-flow positive by the end of this year, too. The lone exception -- Infrastructure and Enabling -- is also probably the easiest to forgive, given the eventual payout of the online realm's potent plumbing.
Right now, at a $3 billion valuation, CMGI is trading for little more than what it paid for its majority stake in AltaVista last year. Buy AltaVista, get CMGI free? Not even. Back out the cash and you're getting a big piece of AltaVista free too. Yes, AltaVista, the global powerhouse where less than half of its 65 million monthly users live stateside. It actually trumps $22 billion Yahoo! in places such as Italy.
CMGI has an attractive portfolio, for the most part. Over the weekend, Barron's noted how eBay might be making a play for the company's uBid auction site. Deals are still being done, handsome returns are still there to be had, they're just not always of the IPO variety right now.
In sum, today's gloom and doom and market demand for corporate performance is what makes CMGI such a compelling win-win situation. If Internet stocks march back into favor, history repeats and it's 1995-1999 all over again.
If the sour sentiment lingers, regardless of whether the sum of CMGI continues to trade for well below its collective parts, what will you have? A cash-rich company trading at barely 1x year-ahead sales on an enterprise value basis. A growth company with a knack for picking tomorrow's superstars, today. A ground-floor opportunity, again.
Hop in. Aim high. You might never get that third chance.
