CMGI Blasts Past Earnings Estimate

Powered largely by an investment in community site GeoCities, Internet incubator CMGI (Nasdaq: CMGI) handily exceeded analysts’ expectations yesterday by reporting record net income of $452.7 million (US$) or $4.74 per share for the fourth quarter. It had widely been expected that the company would report income of only $4.08 per share.

Fourth-quarter results got a massive boost from the pretax gain of $661.2 million from the conversion of CMGI’s stake in GeoCities into Yahoo! common stock and the pretax gain of $81.1 million from the initial public offering of CMGI subsidiary Engage Technologies, a profile driven-marketing company.

Aside from these two one-time gains, CMGI reported net fourth-quarter revenue of $53.6 million, a 17 percent increase compared with the third quarter and a 107 percent increase compared with the fourth quarter of last year. For the fiscal year, CMGI’s net revenue grew to $175.7 million in 1999, a 114 percent increase over the $81.9 million the company reported in 1998.

“We continue to build dramatically upon our traffic and the targeting of that traffic, while establishing the infrastructure with NaviNet and Engage to take advantage of low cost or free net access,” said David Wetherell, chairman and CEO of CMGI. “The single most important trend affecting ISPs over the coming years will be free Internet access, and no company is better positioned to benefit from that than CMGI.”

CMGI Will Buy 1stUP.com

CMGI added strength to Wetherell’s statement with the announcement that it has signed an agreement to purchase free Internet access provider 1stUp.com, which allows businesses to offer Internet access subsidized by advertising and e-commerce. The stock-for-stock transaction is expected to close in October. Specific financial terms were not disclosed.

“The increases in Web advertising spending, in tandem with the declines in the cost of bulk connectivity, make the 1stUp.com model an attractive and highly scalable one,” Wetherell said.

Web advertising is now clearly a major focus for CMGI. Last week, the company announced that it will purchase two online advertising companies: AdForce will be acquired for approximately $500 million in stock, and AdKnowledge will be bought for approximately $170 million in stock.

Buying Trend

Also this week, CMGI completed the purchase of Signatures Network, formerly known as Sony Signatures. The music and celebrity licensing and event merchandising company will become a majority-owned subsidiary of iCAST, CMGI’s Internet entertainment company. iCAST is an Internet entertainment venture headed by Neil Braun, former president of the NBC Television Network.

In all, CMGI made initial investments in nine Internet companies, including AuctionWatch.com and Productopia, and follow-on investments in 10 others, including Raging Bull and MotherNature.com.

Starting off its new fiscal year, CMGI completed purchases of Alta Vista and Internet payment services company Cha! Technologies. The company’s other investments since July 31st include Boatscape.com and buyingedge.com.

Stock Impact

Shares of CMGI climbed 3-5/8 to 96-3/4 in early trading today. The stock soared 8 5/16 to 93 1/8 on Monday as investors anticipated the earnings report. CMGI’s announcements are also helping shares of Engage, which gained 1-11/16 to 32-9/16 in early trading today.