In Focus

CMGI & David Wetherrell

Do they have the wherewithal to weather it all?
by Chick Megan

Imagine. Imagine the person who has come to understand the intricacies of the Internet industry in such a way that he is able to capitalize on that knowledge and create a multipurpose company capable of Internet Infiniteness. For all intents and purposes, that man would be a sort of hero, wouldn't he? Able to leap over all other Internet companies with a single bound? Some of you may say that's quite a leap of faith. but is it?

David Wetherell, Chmn/Pres/CEO/Secy of CMGI, wears a lot of hats these days, but that's something he's used to. A man who knows an opportunity when he sees it, he also appears to be a man desperate to complete the circle. His buying frenzies have resulted in a portfolio containing 52 Internet ventures. And he's not stopping there.

According to a BusinessWeek Magazine article, "At the core of Wetherell's plan is to create a network of interlocking Net companies that work together. He wants each of CMGI's sites to feed its users into the virtuous, ever-growing circle. Wetherell's networks draws individual customers through its Alta Vista and Lycos portals, which generates traffic that's crucial to the rest of the enterprise."

Basically, Wetherell wants to create sites that draw you to other CMGI sites. By keeping your on-line time devoted to CMGI specific sites, they would be able to monopolize your time, making them a giant in the industry. Brilliant.

CMGI's Industry is Miscellaneous Financial Services; it's sector, Technology. It is a combination of Internet companies providing Internet Services from Advertising (AdNet) to market profiling (Engage) to Internet access (NaviNet), with the ability to capture and keep consumers via the numerous CMGI "vehicles."

It all sounds terrific, but some of the numbers below have me wondering if it isn't just smoke and mirrors.

Gross Margins
(Sales - Cost of Goods Sold) / Sales

(898,050 - 737,264) / 898,050 = .179 = 17.9%

Net Margins
Net Income / Sales

-1,375,916 / 898, 050 = -1.53 = -153%

Cash vs.. Long Term Debt
Cash / Long Term Debt

639,666 / 228,023 = 2.8

Flowie
(Total Current Assets - Cash) / (Total Current Liabilities - Short Term Debt)

(2,571,875 - 639,666) / (1,461,770 - 523, 022)

1,932,209 / 938,748 = 2.05

52 Week High: $163.50

52 Week Low: $12.87

Current Price: $15.06

CMGI's Gross Margins and Net Margins are as miserable as sleet on a blustery day. But their Cash vs. Long Term Debt and Flow Ratio's are the SEC filing equivalent of a sunny day on the island of Maui. What gives?

Enter Alta Vista. Alta Vista (majority owner CMGI) was the first company to provide, as a search engine, the ability to perform a "search" on the internet. They've continued to be the leader in that field and have also developed other ground-breaking functional capabilities in and around that arena. A report released on November 13, 2000 speaks to these remarkable capabilities and the specific 38 patents awarded to Alta Vista.  These patents practically guarantee Alta Vista's continued success and leadership role. Again, this is just one of 52 Internet Venues that David Wetherall can call his.

So although the margins aren't perfect, the other equations indicate the storm may have passed. I do believe that Mr. Wetherall's faith in the Internet from the get-go and his understanding of its endless possibilities made him a true visionary. Could it be that investors ran for cover during CMGI's blitz-buy? Did they lack conviction in their venture? I can't speak for them personally, but do I think this company can withstand the rough weather? This Chickah would bet her slickah.