RealTime IT News

Engage Reorganizes Finances, Executive Team

Troubled marketing technology provider Engage continues showing signs that it's looking to re-establish itself as a player, taking steps to reorganize its relationship with soon-to-be-former parent company CMGI and appointing a slate of new executives -- including a permanent CEO.

Through its agreement with CMGI, $60 million in debt owed by Andover, Mass.-based Engage will be canceled. In addition, CMGI, which also has offices in Andover, said it would transfer its shares of Engage stock back to the firm for retirement.

In return for the cancellation of debt and the share transfer, Engage said it had paid about $2.5 million in cash to the Internet holding company, in addition to future, quarterly payments totaling $6 million, starting at the end of October, 2003. How much Engage will pay per quarter will be based on the firm's operating income, and if it hasn't already paid off the sum, Engage will have to hand over $2 million by 2006 to cover a portion of the money it owes. Engage also gave CMGI warrants to purchase 9.9 percent of its outstanding stock.

While Engage cedes cash and agreed to a long-term payment schedule, the move frees up the firm's financial position -- which the company hopes will translate in to a higher stock price. For one thing, the cancellation of Engage's nearly-due debt removes nearly all of the company's debt, potentially making it more attractive to investors. Additionally, CMGI owned 148.4 million shares of Engage's outstanding stock -- about 76 percent of the company.

Now that the company has less stock available, there's a chance that the market might view the remaining securities as more valuable (though many dot-coms have tried, and failed, to boost stock price by issuing reverse stock splits, which also serve to decrease the amount of available securities.)

In addition to the overhaul of its finances, Engage also revamped its executive team. Interim Chief Executive Officer and President Christopher Cuddy, who had joined from CMGI to oversee a reorganization at Engage, will step down in favor of John Barone, who assumes the title of president and chief operating officer.

Barone, who previously held the post of senior vice president of sales and marketing, will also hold a position on the company's board of directors.

Engage also announced the appointment of Lisa McAlister to the post of chief financial officer and treasurer. McAlister, who joined quietly in June, came to Engage having worked at e-business technology firms IONA Technologies and LavaStorm; online pharmacy Meditrust; and biotech plays Medical Foods and the defunct Innovative Clinical Solutions, now a unit of Comprehensive NeuroScience.

The transactions also help CMGI sever its ties with money-losing Engage, which it founded in 1995 as CMG Direct Interactive, a Web site analysis and marketing play, and the first of CMGI's operating companies. Later renamed Engage Technologies, the firm soon went on a buying streak, appending ad serving (Accipter), online profiling (AdKnowledge), print-to-Web convergence software (MediaBridge), market intelligence and site analytics (I/PRO, also owned by CMGI) and ad networks (Flycast and AdSmart, also CMGI firms) to its roster of services.

When the dot-com bubble burst, however, Engage, like many, was forced to cope with the downturn in online ad dollars by selling or closing many of its units. AdKnowledge eventually went to rival ad server BlueStreak, while Engage sold I/PRO to TopicalNet and shuttered its ad network.