, the Andover, Mass provider of manager hosting services, is to be given debt financing as a result of a financial restructuring agreement that was reached today between NaviSite owner CMGI Inc.
and its other majority-owned subsidiary AltaVista Company, and Compaq Computer Corp. and Compaq Financial Services (CFS, a wholly owned subsidiary of Compaq).
Ultimately, the move to realign financial obligations between the two companies will be achieved when Compaq retires two CMGI promissory notes, of an outstanding $220 million, issued by CMGI in 1999 related to the company’s acquisition of AltaVista.
In exchange, CMGI will transfer to Compaq a combination of cash, CMGI common stock and CMGI’s interest in B2E Solutions LLC, a joint enterprise formed by Compaq and CMGI last year
For NaviSite though, both CFS and CMGI will provide the firm with debt financing and CFS will restructure certain outstanding lease obligations. CMGI will also convert all of its outstanding notes and obligations into NaviSite common stock.
Due to financial troubles, CMGI put NaviSite up for sale in March, 2001. In August, the firm cut 25 percent of its staff after the resignation of CEO Joel Rosen. For the past eight months NaviSite has been refocusing its marketing efforts away from its ASP business to concentrate on the provision of managed services.
According to Tricia Gilligan, acting CEO of NaviSite, the agreement helps strengthen NaviSite’s financial position: “It accelerates our path to profitability and solidifies our position within the Enterprise services market,” she says.
For David Wetherell, chairman and chief executive officer, CMGI Inc., the restructured terms allow CMGI to refocus critical financial resources on building its future business: “We are extremely pleased with this agreement and achieving our overall target of reaching recurring operating profitability by Q4 of our current fiscal year,” he explains.
As for NaviSite’s future, Gilligan argues that the economics of outsourcing are still powerful and says the firm is focused on delivering operational excellence and high value-added solutions to its customers.
“We’re seeing continued demand for our services and we believe this agreement strengthens our ability to establish leadership in an emerging market,” she concludes.
NaviSite provides enterprises with outsourced Web hosting and managed application services, but due
Additional details of today’s agreement can be found in the CMGI Form 8-K and NaviSite Form 10-K filed on October 30, 2001.