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2HRS2GO: CMGi taking an unfair beating

    Being a popular Internet stock, CMGi (Nasdaq: CMGI) has been ludicrously overvalued, so it's hard not to feel that its drubbing has been a long time in coming.

    Yet even Luddites regarding the Internet have to wonder at the moronic depths reached by the so-called investors dumping CMGi today.



    CMGi: Good deal now, or due to fall some more?



    At a mere $91 or so per share, the Internet incubator -- a term that, among other things, describes ovens used for growing bacteria on petri dishes -- has shed more than 40 percent of its value since reaching an all-time, split-adjusted high of $165 in April. The decline accelerated today, with CMGi's per-share price dropping almost $10.

    The drop of almost 10 percent from Thursday's market closing price came after CMGi reported third quarter results that seemed to miss the consensus analyst estimate.

    Seemed to. To be fair, it was an easy mistake to make: the company in its news release reported a net loss of 30 cents a share, and First Call consensus, on the surface, predicted a deficit of 13 cents. CMGi's finances cover a much broader melange than you'll find in most publicly-traded companies. News stories that ran immediately after the press release came out correctly ran the figures, and CMGi shares fell in after-market Instinet trades.

    You'd think any serious shareholder would listen to the conference calls that accompany quarterly reports. CMGi executives on yesterday's call noted that if all one-time events are excluded, then actual results and estimates basically came in at the same point, 22 cents a share. Sure, the accounting is tricky at best, but we're talking about an Internet company, so it shouldn't shock anyone.

    But even more important, we're talking about CMGi, which is basically a glorified Internet mutual fund. The company tries to identify budding Internet stars, buys them, hooks them up with related companies, then either sells them or spins them off.

    Investment funds aren't measured by operational earnings. Just skip straight to the balance sheet and look at the balance sheet.

    By that standard, CMGi remains a raging success. Among other things, the company reeled in more than $55 million from stocks sales during the third quarter; took in more investment capital from the likes of Gateway, which dropped $200 million into CMGi's lap; spun out two companies in IPOs.

    If you're going to invest in the Internet, CMGi remains the single best vehicle. No one has been as aggressive in developing new companies. No one has done a better job of driving paper gains for Web investors.

    Perhaps CMGi deserves punishment for its large role in feeding the craziest, greediest, most senseless bout of money funneling in the history of capitalism. And after some of the fawning and flattery directed at CMGi's management team during yesterday's conference call, there's more than an bit of ironic pleasure to be derived from today's plunge,

    But it's a guilty pleasure at best, because the plunge is happening for the wrong reason.

    Other issues:

  • Multex.com Inc.
  • (Nasdaq: MLTX) Here's living proof that most people have no interest in investing in products that they actually use. At yesterday's PaineWebber Growth & Technology Conference -- an event filled with investment pros who subscribe to Multex's service -- not even 40 people bothered to hear the presenation of Multex CEO Isaak Karaev.

    Too bad, considering the brokerage research distributor is a company with compound annual revenue growth of 145 percent, few direct competitors (and none at all in some segments), in a market that will only keep growing as more individuals take up stock trading.

    The overall technology market remained stuck in negative territory as the week neared its close. With two hours left in regular trading, the Nasdaq Composite Index was down 36.95 for the day, to 2447.67; the S&P 500 had slid 11.98 to 1290.84; and the Dow Jones Industrial Average had fallen 141.53 to 10479.74. 22GO>