May Be Time To Buy CMGI

Well, this hardly can be the market reaction CMGI and its investors had hoped for in the wake of the company’s reorganization and much-better-than-expected Q4 earnings.

Though a loss of $633.7 million, or $2.17 per share, doesn’t exactly qualify as good news, it easily beat street estimates of a $2.45 per share net loss.

But since CMGI released its fourth-quarter report after regular trading hours on Thursday, shares have fallen 16% to $30.63 by mid-afternoon on Tuesday and are in danger of dipping below $30 for the first time in 19 months.

CMGI’s precipitous ticker plunge this year (down 78% from the Dec. 31 close of $138.44) has been a nightmare for company shareholders, especially coming after last year’s phenomenal 940% gain.

The truth, though, is that CMGI was overvalued for much of last year, as were most other ‘Net stocks. More specifically, CMGI’s “halo” blinded many shareholders, who came to believe that 1) A bet on CMGI was tantamount to a bet on the Internet economy (of course, you can argue the same this year, for a dramatically different reason), and 2) CEO David Wetherell and crew were incapable of doing anything other than pick emerging ‘Net winners.

This year, however, CMGI shares have plummeted and a number of the company’s investments are hitting hard times, with several announcing layoffs and one ( nearly shutting its doors before receiving an emergency cash infusion.

So while the CMGI halo is gone, in its place investors may be looking instead at a buying opportunity, for just as the market was excessively generous to CMGI last year, now it may be going too far in punishing the company.

The fact is that CMGI, unlike any number of emaciated ‘Net players, still possesses vast resources. Even at $30 per share, CMGI has a market capitalization of $8.8 billion, placing it among the top 20 largest Internet companies.

In terms of recent quarterly revenue, only five other Internet companies – Cisco Systems , America Online , , Palm and marchFIRST – can top CMGI’s Q4 total of $377 million.

And while it’s tempting to interpret recent layoffs at Engage Technologies , AltaVista and iCast in a negative light, these moves, along with CMGI’s decision to reduce the number of its majority-owned operating firms from 17 to five, indicate a company taking serious steps to get its fiscal house in order and increase shareholder value.

While it may not happen overnight, it doesn’t have to, for unlike so many one-note Internet companies whose business plans have unraveled along with their stock prices, CMGI has been built for the long haul. That halo may yet reappear.

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