CMGi Inc. (Nasdaq: CMGI) rode its Geocities and Engage Technologies investments to better-than-expected earnings in the fourth quarter.
After market close Monday, the Andover, Mass.-based Internet investment firm reported a fiscal fourth quarter profit of $452.7 million, or $4.74 per share. First Call's consensus estimate called for earnings of $4.08 a share, for the quarter ended July 31. The company historically has generated most of its income from stock investments, making its net income difficult to forecast.
Also Monday, CMGi announced the purchase of free Internet access provider 1stUp.com, which already partners with CMGi's AltaVista subsidiary for AltaVista FreeAccess. Financial terms of the acquistion were not disclosed. "The single most important trend affecting ISPs over the coming years will be free Internet access," CMGi CEO David Wetherell said.
Fourth quarter revenues for CMGi rose 17 percent sequentially, and 107 percent year-over-year, to $53.6 million. CMGi expects first quarter revenue to more than double sequentially, with Web-related operations rising more than 300 percent, Wetherell said, during a conference call with analysts.
Recently-acquired AltaVista forms an important part of those plans. CMGi estimates that AltaVista now ranks as the seventh most-visited site on the Web. More than half of the website's traffic comes from overseas, a market not measured by Media Metrix.
AltaVista will file for an initial public offering after Oct. 31, Wetherell said. CMGi expects to take AltaVista public in January, he said.
Yahoo's purchase of Geocities yielded a $661.2 million pre-tax gain during the fourth quarter for CMGI, which saw its Geocities stake converted to Yahoo common stock. CMGi also recorded a $81.1 million profit before taxes, on the issuance of stock related to the recent IPO of Engage Technologies. CMGi owns 38.6 million shares of Engage.
The company now owns more than $3 billion in marketable securities, Wetherell said.
CMGi's one-time events in the fourth quarter included $1.6 million in write-offs of in-process R&D at acquistiions Magnitude Network and Nascent Technologies, and a gain of $53.2 million from the sale of CMG Direct.
CMGi's Internet business unit saw revenues of $18.8 million, up 351 percent year-over-year, and 49 percent from the third quarter. Its Planet Direct subsidiary saw lower revenue, mainly because it no longer has one customer that generated $2.3 million of business in the previous quarter. Not including one-time charges, CMGi's Internet business unit lost $47.7 million.
A loss of $2.6 million came from companies in which CMGi has investments ranging between 20 and 50 percent.
The company's fulfillment services segment saw business rise to $34.8 mlllion, up 60 percent from a year earlier and 5 percent from the third quarter, largely on increased business from Cisco Systems. Fulfillment generated operating income of $2.4 million in the fourth quarter.
For the full fiscal year 1999, CMGi's total revenues rose 114 percent to $175.7 million.
Wetherell also suggested CMGi deserves a higher market valuation than another, younger Internet investment company, Internet Capital Group Inc. (Nasdaq: ICGE), which recently went public. ICG closed Monday with a market cap of more than $10.4 billion, compared to $8.8 billion for CMGi.
"We think it's interesting there is such a market cap disparity between CMGi and ICG," Wetherell said, noting that CMGi, unlike ICG, has revenue-generating operations and a larger portfolio.
Shares of CMGi rose 8 5/16 to 93 1/8 in Monday's regular trading prior to the quarterly report. Of nine Wall Street firms surveyed by Zack's Investment Research, six have the equivalent of "moderate buy" ratings on CMGi, and three recommend the stock with "strong buy" advisories.>