CMG-Wiz? Internet Investment Firm Stock Soars

Its stock jumped 20% to an all-time high of more than $92 per share April
13, its market cap sits at over $945 million, it posted a $5.8 million loss
in the latest quarter, and the question remains: is CMG Information Services
still hot? Perhaps.


Why? despite an alphabet soup name, CMG invests in Internet firms–more
than a dozen to date. Names like Lycos (NASDAQ:LCOS) and GeoCities top the
list of better known ones. So valuing CMG on direct marketing revenue (its
old mainstay) is out of step. The key to CMG is off-balance sheet equity,
Internet equity, which is the flavor de jour again for investors. CMG owns
42% of Lycos which alone is worth $428 million according to Wall Street as
of April 13 close.


CMG owns 44% of the number one free Web page (community) building site
GeoCities, a candidate for initial public offer if we ever saw one. We
estimate GeoCities could go live at anywhere between $250 million to $350
million at IPO. CMG’s 44% at that estimated IPO range could fetch as much
as $150 million.


Between LCOS and GeoCities that’s $582 million sitting off balance sheet.


Toss in the other 10 or so privately-held Internet firms (see list),
including Web site solution provider Ikonic, and the portfolio here could
find buyers at north of CMG’s market cap.


As we’ve said in past reports over the last four years when analyzing CMGI,
the off-balance sheet investment portfolio value could exceed the trading
value of CMGI shares even today at the $945-plus million market cap. Yes,
we think it may be touching the froth stage but still may be the closest
thing public investors can get that’s a venture-like return. Not as good as
a year ago for sure but . . .


Overall we think the portfolio at liquidity could hover as high as $1.3
billion. The key, however, is that some of these firms may not be as easy
to sell or IPO as others. But the ones that are hot so far make up for the
ones that are not so far. Look at the basket here:


CMG Info’s Portfolio




























































CMG investments

business/product

blaxxun interactive

3D software

Chemdex Corp.

Lifescience on Web

GeoCities (44%)

Free web pages

Ikonic

Website solutions

Lycos (42%)

Search/navigation

Koz

Website mgt

Parable

Internet software tools

PlanetAll

Contact management

Reel.com

Movies, videos

Silknet

Enterprise software

Softway Systems

UNIX for NT

Speech Machines

Voice driven systems

Vicinity

Custom directories

source: CMG Info (www.cmgi.com)


Revenue for the latest quarter ending January 31 showed $17.8 million
revenue and the aforementioned $5.8 million loss or $0.58 loss per share
vs. $0.07 EPS for the same quarter in 1997. The six-month revenue for the
period ending January 31 was $42.9 million revenue and $3.1 million loss or
$0.32 loss per share vs. $.074 loss per share for the six month period
ending January 31, 1997.


At a 20x Lycos-like revenue multiple, CMGI could trade north of $1.2
billion–but it’s not Lycos. And we’re not convinced that navigation stocks
won’t give up a piece of the sensational gains they’ve had the past month
anyway.


With its asset mix we prefer to value the potential on the portfolio and
its past successes. CMG looks like it may be able to raise cash anytime by
selling LCOS shares or doing a private divestiture or IPO with the stronger
candidates.


CMG sold an early investment, BookLink, to AOL; NetCarta to Microsoft;
Lycos to the public; and TeleT to Premeire.


Notably the only mis-step looks like Freemark which closed down. It wanted
to provide an ad-based Internet service–an idea before its time given that
ad revenues for the Internet only just reached $1 billion this year
(compare that to TV at $40 billion).


All we can say so far is not CMG but what an @Venture.

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