1100 Winter Street, Suite 4600
Company Perspectives:
CMGI, Inc. provides technology and eCommerce solutions that help busi nesses market, sell and distribute their products and services. Throu gh its subsidiaries ModusLink and SalesLink, CMGI offers targeted sol utions including industry-leading global supply chain management and web-based distribution and fulfillment. In addition, CMGI's venture c apital affiliate, @Venture, invests venture capital in a variety of technology ventures.
CMGI, Inc., provides technology and e-commerce solutions that assist businesses to market, sell, and distribute their products and service s. Through its subsidiaries, ModusLink and SalesLink, CGMI provides t argeted solutions including supply chain management and web-based dis tribution and fulfillment. In addition, the company's venture capital affiliate, Ventures, invests in a range of technology companies. CMG I offers a variety of services and solutions, including inventory man agement, sourcing, manufacturing, configuration and assembly processe s, EDI solutions providing direct connections with customer informati on technology systems, e-commerce, order management, customer service and supply chain design, and consulting. CMGI also offers marketing and distribution services, entailing fulfilling orders for promotiona l and collateral products by assembling and shipping the items reques ted. In addition, the company provides print on demand solutions, pro duct and literature inventory control and warehousing, reporting, res earch and analysis, shipments, billings, back orders, and returns. Th e company serves a broad array of clients, such as software publisher s, hardware manufacturers, telecommunications companies, broadband an d wireless service providers, and financial institutions. The company 's global reach includes operations in the United States, Canada, Uni ted Kingdom, the Netherlands, Hungary, France, Singapore, Taiwan, Chi na, Malaysia, and Ireland.
Beginnings
CMGI, Inc., was founded in 1968 as College Marketing Group by Glenn a nd Gail Mathews who aimed to sell lists of college courses and names of college faculty to textbook publishers. In 1986, David Wetherell a ssumed control of the small direct marketing company in a leveraged b uyout, renamed it CMG Information Services, and took it in a new dire ction--cyberspace. The company went public in 1994, selling 1.2 milli on shares at $8 each. That same year, with $900,000, the comp any created Booklink Technologies, one of the world's first commercia l web browsers, enabling customers to select and purchase textbooks. Wetherell sold the browser to America Online in exchange for 710,000 shares of its stock, valued at $70 million. In 1995, the company used the proceeds to launch the world's first Internet-only venture c apital firm, @Ventures, to fund and nurture promising new techno logy businesses. As a result, Wetherell began investing in fledgling Internet firms including Blaxxum Interactive, Lycos, and Ikonic.
Company Expands into Cyberspace in the 1990s
The company formed a second venture fund, @Ventures II, with  6;60 million in 1996 and expanded its Internet reach by investing in ThingWorld.com, Silknet Software, Premiere Technology, Vicinity, and GeoCities. In the same year, the company created two Internet-focused majority-owned companies, Engage (Internet marketing) and NaviSite ( e-business outsourcing). In 1997, @Ventures invested in various web-oriented firms, including Ventro Corporation (formerly Chemdex), Speech Machines, Reel.com, PlanetAll, Softway Systems, and KOZ.com. C MG also launched Planet Direct, a developer and distributor of wired and wireless customer portal services, and Adsmart, an online adverti sing network (now part of Engage Media). CMG forays into the Internet arena caught the attention of Microsoft and Intel, both of which too k just under a 5 percent stake in the company in 1997. With CMGI's ex panding portfolio of Internet firms, the Internet incubator company s ought to become a fully developed Internet and operating development firm.
In 1998 the company formed @Ventures III, a $282 million cap ital venture fund geared toward expanding investments in Internet and technology companies. CMGI contributed 20 percent to the fund with t he remaining 80 percent capitalized by outside limited partners. The fund invested in a range of enterprises, including MyFamily.com, Prom edix, ONElist.com, Furniture.com, Hotlinks, Asimba.com, Virtual Ink, RagingBull, WebCT, Visto.com, MotherNature.com, Critical Path, and Ti ckets Live. The company's partnership with the Sumitomo Corporation h elped boost CGMI's Internet business in the rapidly expanding Japanes e market. The company also acquired Accipiter, an ad serving technolo gy platform, and merged it into Engage Technologies, its Internet mar keting firm. In addition, by merging its acquisitions of InSolutions and OnDemand Solutions into its subsidiary, SalesLink, the company be lieved it could strengthen its e-commerce and fulfillment offerings.
Aggressive Adds to its Internet Holdings
CMGI took six of its Internet companies public in 1999, among them Cr itical Path, Silknet Software, and Ventro Corporation. It also made f ive strategic sales, including GeoCities to Yahoo! and Raging Bull to AltaVista. Among the Internet firms added to CMGI's portfolio in 199 9 were Oncology.com, Snapfish, Spotlife, Vcommerce Corporation, Gamer s.com, Dormania.com, FindLaw, Boatscape.com, Mondera.com, Idapta, Hot links, AuctionWatch.com, Radiate, CarParts.com, PlanetOutdoors.com, E xp.com, BizBuyer.com, Productopia, eCircles.com, OneCore.com, and Nex tMonet.com. The company also announced a $100 million initiative to build and launch iCAST, a new majority-owned operating company foc used on Internet broadcasting. The company's goals for iCAST included offering users a highly interactive environment with a downloadable desktop entertainment application, syndicated and original audio and video content, self-publishing tools, instant messaging, news feeds, and the ability to communicate or connect with entertainers.
In addition, the company's flurry of acquisitions and mergers in 1999 included buying out I/PRO, a leader of world wide web traffic verifi cation and analysis, and Adknowledge, a provider of web marketing ser vices. CMGI merged the two enterprises into Engage as wholly owned su bsidiaries. These acquisitions and mergers, together with the $50 0 million acquisition of AdForce, a web ad management company, and th e $11.3 million purchase of Flycast, an Internet advertising netw ork, helped to boost CMGI's position and services in the online marke ting and advertising field. CMGI further expanded its Internet servic e offerings with the acquisition of 1stUp.com, an Internet advertisin g provider. The company also acquired Activerse and Tribal Voice, mer ging these providers of instant messaging and interactive communicati on solutions under the Tribal Voice name. CMGI bolstered its e-commer ce and fulfillment services with the acquisition of ExchangePath (for merly 1ClickCharge), an online payment solution provider, and folded ZineZone and Signature Networks into iCast to expand its online enter tainment offerings.
On March 18, 1999, moreover, the company joined the Nasdaq 100. In Ju ne, it bought an 83 percent stake in search engine AltaVista from Com paq, then filed to take it public. The IPO, however, was delayed when the Nasdaq proved erratic, and finally withdrawn in 2001 with the pl unging markets. In October the company completed the initial public o ffering for NaviSite, selling 5.5 million shares at $14 each. In December, CMGI launched CMGI Solutions, a new majority-owned operatin g company focused on providing e-business solutions. During 1999, sha reholders received a boost when CMGI formed a direct share program al lowing shareholders to participate in IPO's of CMGI companies. The fi rm also jettisoned part of its past after selling its lists and datab ase services unit CMG Direct. In addition, the company set up @V entures B2B Fund to focus on business-to-business Internet investment s.
In early 2000, the company continued to expand its holdings with new mergers and acquisitions. The company's various @Venture funds i nvested in a variety of Internet and technology firms, such as TheRea lm, Corrigo, Alibris, Ironmax, The EC Company, Dialpad.com, Tvisions, OneMediaPlace, Dejima, Gofish.com, MobileLogic, AnswerLogic, Industr ia Solutions, NextOffice.com, FoodBuy.com, Half.com, and Knowledge Fi rst. The company also sold several firms, including Silknet Software to Kana Communications, Half.com to eBay, and eGroups to Yahoo! At th e same time, CMGI acquired Adsmart and together with Flycast merged i t with Engage. The company further acquired yesmail.com, an outsource r of permission email marketing technologies and services, and added online auctioneer uBid. CMGI acquired e-commerce software developer T allan Inc. for $920 million and merged it with CMGI Solutions, th e company's e-business software firm. In October, CMGI Solutions subs equently adopted the Tallan name after the Irish-Gaelic word meaning "talent." CMGI also merged Raging Bull, an online financial community , into AltaVista, creating additional search engine services. It inve sted $1 billion into the formation of @Ventures Technology F und, focusing on web enabling technologies. The company also expanded its investing through partnerships that included CGMI Asia with a un it of Pacific Century Group; wireless broadband Internet service prov ider SoftNet Zone with SoftNet Systems, Cisco Systems, Compaq, and No kia; and Internet profiling services company CMGion with Compaq, Nove ll, and Sun Microsystems. In November as the markets began to decline , CMGI announced it was spinning off iCAST, exiting the entertainment portal business, and 1stUp.com, exiting the Ad-support Internet acce ss field.
Collapse of the Internet Bubble: CMGI Restructures
By the time of the crash of the Internet bubble, CMGI's portfolio inc luded more than 70 Internet companies. The company's stock that once traded at $160 a share in January 2000 fell to below $2.00 a share by September 2001. The company reported a fourth quarter net lo ss for 2001 of $1.27 billion, nearly double its net loss in the s ame quarter the year before. CMGI chairman and chief executive David Wetherell, who had bought the firm in 1986, said the company would pu rsue a strategy of spinning off underperforming and non-strategic ass ets in order to focus on core profitable businesses.
As a result, the company ceased funding the operations of NaviPath, t he interest access provider, and sold its webcasting firm Activate.co m to Loudeye Technologies Inc. It sold its online advertising assets to BlueStreak, a marketing firm, and spun off other firms, including Furniture.com, instant message service PowWow, investor site Raging B ull, and Internet Profiles Corporation. In September 2002, CMGI also divested itself of Internet marketing firm Engage, and sold NaviSite, Inc. to ClearBlue Technologies, a manager of a nationwide portfolio of carrier-neutral data centers. In addition, the company divested it s debt and equity interests in Signature SNI, Inc. in November. At th e end of the 2002 fiscal year, CMGI's net loss totaled $524.9 mil lion.
The company continued to restructure its operations in 2003, exiting the technology professional services business. In March, it sold both email acquisition and retention services provider Yesmail, Inc., to InfoUSA for cash and Tallan, Inc., to an investor group led by Tallan 's management team, including President and Chief Executive Officer P eter Bourdon. In April 2003, Overture Services, Inc., acquired AltaVi sta for $60 million in cash and 4,274,670 shares of Overture comm on stock. For fiscal year 2003, the company narrowed its net loss to $216.3 million, about half its net loss for the previous year.
Recovery in the Early 2000s
By 2004, CMGI had weathered the worst of the Internet crash. In May, the company's wholly-owned subsidiary, SalesLink, expanded its supply chain management operations into Eastern Europe by opening a new ope rating facility in Miskoic, Hungary. The new facility added to the co mpany's other locations in Ireland and The Netherlands. In August, th e company acquired Modus Media, which it folded into its supply chain management business, SalesLink. The combined businesses were reorgan ized as ModusLink with the SalesLink marketing distribution services business continuing under the SalesLink name. CMGI announced the appo intment of a new president and chief executive officer in August. Jos eph C. Lawyer took over the post from George A. McMillan, who oversaw the company's restructuring from an Internet operating and developme nt firm to a global integrated solutions provider. Lawyer came from R R Donnelley's (RRD), where as vice-president he diversified RRD's hol dings by pursuing growth in emerging markets, international start-ups , and acquisitions.
In a further sign of recovery and renewed expansion, the company's su bsidiary, ModusLink, expanded its Utah operations in August 2005 by o pening a new facility in West Valley. The expansion stemmed from incr eased demand for ModusLink's supply chain solutions within the techno logy market. The new facility provided a broad range of forward suppl y chain services, such as supply chain design and consulting, just-in -time materials planning and procurement, inventory management, assem bly and packaging, and fulfillment to client's distribution centers, retail partners, and end users. ModusLink also opened a facility in B ron in the Czech Republic, offering clients a low cost infrastructure and strong transportation grid, enabling products to be shipped to a nd from key distribution points for final delivery to countries in Eu rope or outside the region to the Americas or Asia. For the 2005 fisc al year, the company reported net revenue of $1.1 billion, an inc rease of $672.3 or a 169 percent increase over 2004. CMGI attribu ted the improved performance largely to the acquisition of ModusLink, which provided significant financial benefits driven by its global s upply chain services business. In October 2005, CMGI announced that i ts WebCt Inc. unit was being acquired by education software maker Bla ckboard Inc. for $180 million in cash. The parties expected the t ransaction to close by the end of the year or in early 1996, pending regulatory approval.
Principal Subsidiaries: ModusLink Corporation; SalesLink Corpo ration.
Principal Competitors: Internet Capital Group Inc.; Optiant In c.; Redprairie Corporation.
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