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CMGI's Endless Appetite

A year ago it was fair to argue that CMGI's (CMGI) strategy of acquiring and investing in dozens of Internet companies, while not exactly haphazard, lacked clarity.

Since then the aggressive Net venture fund's game plan has come into sharper focus: It wants to take over the Internet.

I exaggerate, but only slightly. CMGI is competing to win in several critical areas. And with a market cap of more than $30 billion, the company has little problem financing its voracious appetite for start-ups.

One of the key element's of CMGI's strategy is to control the market for online advertising services, now dominated by DoubleClick. CMGI has purchased a number of ad services and marketing companies since last summer and now looms as a serious contender to DoubleClick (DCLK).

CMGI also intends to challenge the portal giants with AltaVista, the popular search engine that has been re-tooled in anticipation of a public offering that promises to be one of the most highly anticipated 'Net ticker debuts of the year. (On Friday, AltaVista submitted documents to the SEC showing it plans to raise $258.5 million through the sale of 14.8 million shares in the $18-$20 range. The IPO may come next month.)

CMGI is making a big play in the hot B2B sector as well, launching a separate venture fund for B2B start-ups and forming a professional services unit - CMGI Solutions -- for companies trying to build e-commerce Web sites.

As part of that effort, CMGI on Monday announced it would purchase e-commerce services provider Tallan for $920 million in cash and stock. (See CMGI Buys Tallan.)

Tallan, which on Feb. 1 filed an initial public offering to raise $75 million, counts among its clients barnesandnoble.com, EMC, eToys and priceline.com. The company had revenue of $53 million in 1999.

Last week CMGI announced the purchase of online auction site uBid.com (UBID) for $407 million. Though it is the No. 2 auction site, uBid trails eBay badly and would not have survived on its own. While it will be interesting to see if CMGI will make a run at eBay, I suspect that wasn't the intent with this purchase. Rather, CMGI needed an auction component and found a good deal with uBid, which has been trading in the $20s, far below its high of $106 on Dec. 31, 1998.

CMGI's acquisition binge has been greeted with enthusiasm by investors. Shares of CMGI have more than quadrupled in the past year as the market has witnessed CMGI confidently laying down bets all over the board.

Investors believe that CMGI has a feel for where the Internet is going, and that the company doesn't hesitate to position itself to take advantage of emerging trends and technologies. Barring some major misstep, CMGI will continue to enhance its reputation as the smartest Internet investors out there.



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