CMGI Inc. (Nasdaq: CMGI), one of the first and largest incubators of e-commerce and Internet companies, said Thursday it will reorganize its assets in a bid to encourage each of its holdings to pursue profitability.
Battered by the high-technology stock sell-off that began in earnest in the spring, CMGI has seen its market capitalization cut dramatically over the course of the year, from almost $50 billion (US$) to $12.75 billion, where it stood early Friday.
As part of its plans for reorganization, CMGI is also going to refocus on its core holdings, abandoning ambitious plans for an international Internet investment fund and saying that it will, over time, reduce the number of businesses in which it holds a majority ownership from 17 to 10 or fewer.
A New Look
Starting when it reports its fourth quarter earnings later this month, CMGI will report financials broken out into categories, a move that the company hopes will show investors that the incubator is focusing on becoming profitable in the near-term.
“Improving our path to profitability is the single driving force here,” CMGI Chairman David Wetherell said.
Long-range plans call for each business area to be anchored by one or two firms that CMGI will steer toward public offerings and that have strong prospects for profitability, the company said.
CMGI will categorize its interests in the following manner: 1) search engines and portals, which will include AltaVista, iCAST and MyWay.com; 2) infrastructure, including Activate, ExchangePath, NaviSite Tribal Voice and 1stUp.com; 3) Internet professional services; 4) interactive marketing, including AdForce, Engage and Yesmail.com; and 5) e-business, featuring SalesLink and uBid.com.
The company’s affiliated venture wing, [email protected] will be viewed as a sixth business area.
Deals To Be Done
The move reflects the sea change in investors’ moods about dot-coms of all stripes. The exuberance shown early this year gave way to skepticism as stock prices plunged in April and analysts and investors alike demanded more evidence that e-commerce concerns are pursuing profitable courses. Even e-commerce bellwethers such as Amazon.com have been caught up in the shifting tides.
Options for companies not viewed as strong players in the fields include mergers or outright sell-offs, the company said. Wetherell said CMGI, which has acquired 33 companies during the last two years alone, will continue looking to acquire firms it sees as strong players in each area.
Analysts point out that CMGI is not in a cash crunch. With about $1.7 billion in cash, the company could continue its aggressive growth strategy, which includes $25 million of venture capital investments each month, for as long as two years.
One Year Rollout
The plan, Wetherell said in a conference call, will unfold over the course of the next year. By the end of the 2001 fiscal year, he added, the company will have pared its holdings to 10 or fewer companies and “improved financial performance.”
CMGI is based in Andover, Massachusetts. In addition to the 17 companies in which it holds majority shares, the company owns equity stakes in more than 50 other firms, including Furniture.com, MotherNature.com and Foodbuy.com.
Shares of CMGI had fallen more than five percent to $40.937 in early trading Friday.