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Has CMGI Turned the Corner?

Internet investor CMGI saw first-quarter revenue drop 22 percent but cut operating losses 81 percent from the previous quarter -- a hopeful sign that its 16-month restructuring is stemming the flow of red ink.

For the three-month period, the Andover, Mass., firm posted revenues of $200.7 million, down from $255.5 million in the fourth quarter. However, the total operating loss of $207.1 million was far better than the $1.07 billion figure it posted in the previous quarter.

Net loss was $224.8 million, or 65 cents a share, compared to $1.27 billion, or $3.69 per share last quarter.

"Our successful efforts to significantly reduce our operating losses and complete the necessary financial restructuring tasks underscore the drive of CMGI to complete our business realignment and set the stage for the company's future growth," David Wetherell, CMGI's chairman and CEO said in a statement.

Other developments in the quarter include: a restructuring of debt with preferred shareholders and Compaq ; a cut of Wetherell's salary to $1 to appease shareholders; and jettisoning struggling properties, such as custom portal builder MyWay.com.

Looking forward, CMGI -- which also owns search engine AltaVista and marketing technology play Engage -- expects second quarter revenue of $210 million to $220 million. If reached it would mark the first sequential quarterly revenue gain since the fourth quarter of fiscal 2000.

CMGI CFO George McMillan indicated that the company's revamping was winding down and that its remaining firms would fall into three categories: e-business; enterprise software and services; and managed application services.

"Most of the restructuring -- either the shutting down of businesses, or restructuring --is behind us," McMillan said. "The cash we have will be devoted to operating the business."

An area of concern include the company's cash position. CMGI expects to exit 2002 with $250 million in cash and cash equivelents, about $75 million less than previously predicted. It is taking steps to reduce the cash burn rate however.

Also disconcerting to investors was an accounting error that will force CMGI to amend its 2001 results.

The earnings report was delivered after trading Tuesday. Earlier, shares of CMGI jumped nearly 16 percent, to 2.3. It gave much of it back on Wednesday though, with shares falling 0.24, or 10 perecnt, to 2.06.

In the last 52 weeks, the issue has traded between 0.6 and 13.