Dueling Fools
August 04, 1999

RU4 CMGI?
Bull Argument

by Rick Aristotle Munarriz ([email protected])

So CMGI spent $6 million over the last three years in acquiring a stake in the growing GeoCities online community. It nurtured it. It watched it become a publicly traded powerhouse. Earlier this year Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> bought out GeoCities -- valuing CMGI's piece at a cool billion dollars.

That's what CMGI has done so well, over and over again, as the Internet's most successful incubator of young online companies. This is the wired world's John Derek sans a penchant for blondes. It finds a looker with potential, catapults it into stardom, then cashes in and moves on to do it again. It's simple, yet nobody does it better. This is the company that picked up Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> for pennies on the dollar. This is, well, CMGI.

It wears the visionary crown with shrewd panache. Is there really any other company that can even compare to CMGI in its ability to perpetually navigate the online minefield and pluck out ten or twenty baggers? Keep looking, I'll meet you at the next paragraph.

CMGI has turned million dollar investments into near billion dollar stakes in Lycos, GeoCities, and now Engage <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ENGA)") else Response.Write("(Nasdaq: ENGA)") end if %>. The beauty of CMGI is that, after the suckling is done, the company has its money back many times over and is ready to do it again and again and again. It's been a relatively flawless approach no matter what the climate has dictated for Internet stocks. When the market is sour it can buy low. When the market is ripe it can sell high.

The only knock I've ever heard on CMGI, which Bill may or may not make, is also unfounded. It's been said that CMGI will take a stake in a small company rather than bank on the leader. It bought into Lycos but not Yahoo! It bought into Reel.com but not e-tail powerhouse Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %>. It might be fair to call CMGI the Internet's pooper-scooper because it's always picking up number two.

But, you see, that's where the values lie. CMGI has made it a habit of picking up yard sale Picassos. History bears that out. Besides, take a look at what CMGI has done in many cases. The company has taken upstarts and eventually sold them to Yahoo!, Amazon.com, America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, and even Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. Technology bellwethers Microsoft and Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> are even two of the largest, and dare I say satisfied, CMGI shareholders. If you're going to judge a company by the company it keeps -- this is one great company.

It's also one that has rewarded its stockholders. I mean, sure, it has been a 50-bagger itself over the past two years. However, it has also shared the wealth with a Lycos dividend back in 1997 and by allowing its round lot shareowners to have access to last month's Engage IPO (which more than doubled out of the gate). The company promises even more, and with a portfolio of almost three dozen darlings-to-be, who wouldn't want to be onboard?

The key here is that CMGI is not just a venture capital company. It is a synergy specialist. It will partner its content and communication subsidiaries together to make them even stronger entities. Promising Internet upstarts know that venture capital is there for the taking on any Silicon Valley doorstep. However, with CMGI, they get the money they need now as well as the connections and partnerships they
need for greater credibility.

In the process, CMGI's eyeball collection is growing. In June the company agreed to buy a majority stake in AltaVista. Now it has an even bigger platform to showcase its synergistic ways. The dependable Web search service now has 10 million unique visitors a month -- how's that for popularity?

In March, CMGI was added to the Nasdaq 100 Composite. Validation? Not really. Just ask the shareholders who invested $4,000 into CMGI five years ago. They are millionaires today. The days of proving itself are over. Who would dare take a chainsaw to the ultimate Internet money tree? Oh, that's right, Bill Barker. I think I hear him buzzing already.

Next: The Bear Argument