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

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, EMC, eToys and The company had revenue of $53 million in 1999.

Last week CMGI announced the purchase of online auction site (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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