CMGI hits 52-week high on strong 1Q results

Larry Dignan
3 min read

CMGI Inc. (Nasdaq: CMGI) shares soared up 25, or 13 percent, to a 52-week high of 224 3/4 Thursday after the Internet investment company posted strong sales growth in its first quarter.

On Wednesday, CMGI reported a fiscal first quarter net loss of $117 million, or $1.08 per share. Excluding the effects of writedowns for goodwill and stock compensation, CMGI lost $6.8 million, or 10 cents per share.

Also Wednesday, CMGI announced a 2-for-1 stock split, to take effect Jan. 11 for those holding shares as of market close Dec. 28. As of Monday, CMGI had 122.97 million shares outstanding. It would be the company's sixth stock split since going public in 1994.

Following the quarterly report and split news, shares of CMGI soared in afterhours trading to 230 23/32, up nearly 31 from 199 at the close of Wednesday's regular trading.

Historically CMGI has generated much of its income from sales of stock holdings. In the first quarter, CMGI recorded a pre-tax gain of $46.4 million related to the IPO of Navisite (Nasdaq: NAVI), which is majority-owned by CMGI. The company also raked in $48.3 million from selling Yahoo! (Nasdaq: YHOO) stock. Excluding those stock gains, but including amortization, CMGI lost $252.9 million, or $2.23 per share.

First quarter revenue rose to $123.7 million, a 131 percent sequential gain and 231 percent year-over-year improvement.

CMGI's Internet operations reported revenue of $85.1 million, more than quadruple from the previous quarter's $18.8 million. Most of the improvement was fueled by the acquisitions of AltaVista and Signatures Network, and higher revenues from Adsmart and Navisite. The Internet segment lost $277.4 million including amortization, or $108 million excluding it.

Fulfillment services rose 11 percent sequentially, to $38.6 million from $34.8 million in the July quarter, mainly because of a $4.3 million order from JuniorNet, a children's website. The fulfillment unit reported operating income of $2.8 million.

Minority investments in other companies yielded $1.8 million in losses.

In a conference call with analysts, CMGI executives said the company seeks more growth from its current properties, while extending their reach. CMGI also wants to use its venture funds to focus on the online market for business-to-business commerce, said David Wetherell, CEO and chairman of CMGI.

"We'll be choosing our acquisitions more carefully," said Wetherell, who said CMGI has focused on marketing with the recently announced acquisitions Adforce and Flycast.

But CMGI won't be slowing down; the company expects to broaden its portfolio from 58 companies currently to 120 a year from now. "This is the business model for the new economy," Wetherell said.

In the long-term, CMGI chief David Wetherell said the company will continue to acquire companies and plans to pick up the pace. CMGI plans to acquire three companies a month and not take any time off to digest them. "He who rests rots," Wetherell said.

Earlier Wednesday, US Bancorp Piper Jaffray analyst Safa Rashtchy began coverage of CMGI with a "strong buy" rating. All 11 analysts polled by Zack's Investment Research recommend CMGI with some sort of buy rating.

The next milestone for CMGI will be coming shortly -- the company is expected to announce how the integration of its recent marketing properties is going. CMGI acquired Adforce, Flycast and most recently Yesmail.com.