Cmgi Inc - Major Investments, Partnerships, And Ipos

PARTNERSHIPS MAJOR INVESTMENTS AND IPOS

Using the proceeds from the Book Link sale, CMGI formed @Ventures, the first venture capital firm concentrated solely on Internet-based firms. @Ventures began investing in companies building Web communities; providing Web tools for online advertisers and direct marketers; offering content-related services; and those offering e-commerce and infrastructure services. Via the @Ventures subsidiary, CMGI purchased the commercial rights of search engine Lycos and took it public in 1996. It also invested in GeoCities Inc., ThingWorld.com, Silknet Software, Premiere Technology, and Vicinity Corp. That same year, CMGI created its first majority-owned companies, Engage Technologies and Navisite. Engage was involved in providing Internet marketing solutions, while NaviSite operated as an application service provider (ASP).

CMGI continued to grow in 1997, keeping pace with the booming dot-com industry. The firm struck key partnerships with Intel Corp. and Microsoft, securing large investments from both firms. The following year, CMGI formed a partnership with Sumitomo Corp., which smoothed its entrance into the Japanese market. Meanwhile, @Ventures continued to invest, adding Ventro Corp., Speech Machines, Reel.com, PlanetAll, Softway Systems, and KOZ.com to its holdings. CMGI also launched Planet Direct, a content provider whose name eventually was changed to MyWay.com, and online advertising network Ad-smart.

Along with making key investments and creating new firms, CMGI also was gaining recognition by selling off properties and initiating successful public offerings. In 1998, the firm sold PlanetAll to Amazon.com and Reel.com to Hollywood Entertainment, a move that made CMGI the largest shareholder of the entertainment firm. GeoCities went public that year, and in 1999 Yahoo! bought it for $3.9 billion in stock. CMGI conducted several IPOs in 1999, including Critical Path, Silknet Software, and Ventro Corp., as well as its own NaviSite and Engage units.

In March, the firm sold off its CMGI Direct arm, exiting the direct marketing industry it had been involved in since its inception. At the same time, CMGI announced plans to launch a new majority-owned Internet broadcasting company called iCAST. The firm also began to develop CMGI Solutions, a majority-owned enterprise business solutions provider. Acquisitions during the year included Internet traffic verification firm I/PRO; Internet marketing and management services company Adknowledge; Internet advertising firm Adforce, and Web-based advertising network Flycast. However, the largest deal of 1999 was the purchase of an 83-percent stake in search engine AltaVista from Compaq Computer Corp. As part of the deal, Compaq gained a 16.4-percent interest in CMGI, making it the firm's largest outside shareholder.

As CMGI entered the new millennium, it was intent on continuing its growth. It purchased uBid.com, continued investing in emerging Internet-based firms through its @Ventures arm, and formed a strategic alliance with Pacific Century CyberWorks, which allowed it to penetrate the Asian market. The firm also formed CMGion to operate as a Web content distributor. However, the aggressive growth strategy CMGI had employed during the late 1990s was stifled in the second half of 2000. While the company had been posting substantial revenue gains, its profits had been faltering since 1999, along with its stock price. According to a December 2000 InternetWeek article, "the venture cap company bought up Internet businesses willy-nilly during the delirious days of hyperinflated dotcom stock prices, but has since failed to figure out a way to make its many companies work together for profits." Like many in the dot-com industry, CMGI was forced to restructure. In an effort to cut costs and improve efficiency, it consolidated its 17 operating companies into six different business units including search and portals, infrastructure and enabling technologies, Internet professional services, e-business and fulfillment, interactive marketing, and venture capital.

In November of 2000, CMGI divested both iCAST and 1stUP.com, marking its exit from the entertainment portal market. CMGI also called off a planned IPO for AltaVista. By December, stock was hovering around $9.50 per share, after trading at $163.50 at the start of the year. Over the course of one year, CMGI had lost 96.6 percent of its market value.

CMGI's restructuring continued into 2001, and the firm announced that its @Ventures business was going to pare back new investments. CMGI also closed down its AdForce business in June 2001, along with exiting the online payment industry by selling off its ExchangePath subsidiary. Management believed the firm would succeed by remaining focused on its core business units.