CMGI Posts Wider Loss

ANDOVER, Mass. — CMGI Inc., the once highflying Internet incubator that has been battered by the sharp decline in online advertising, posted a wider second-quarter loss, as revenue met lowered expectations.

CMGI, which owns the struggling AltaVista Web portal, said its net loss for the period ended Jan. 31 came to $2.56 billion, or $7.86 a basic share, compared with a year-earlier net loss of $185.6 million, or 74 cents a share. Excluding acquisition-related expenses, the company said it would have lost $216 million, or 66 cents a share, compared with year-earlier earnings of $1.3 million, or a penny a share.

Revenue more than doubled to $342.7 million — within the company’s reduced target of $335 million to $345 million — from $158.5 million a year earlier.

In January, CMGI cut its revenue forecast, citing a weak online advertising environment and “difficult and unpredictable” market conditions. Before the warning, the First Call estimate was for second-quarter revenue of $362.4 million. Last month, Chairman and Chief Executive David Wetherell said he was “very comfortable” with the revised target and that the company’s cash-burn rate was decelerating.

For the third quarter, CMGI said it expects a loss from operations of $236 million to $246 million on revenue of $280 million to $290 million. The company blamed the revenue drop from the fiscal second quarter on the sale of Signatures Network and continued softness in Internet-based advertising revenue. A year earlier, the company had earnings from operations of $36.6 million on revenue of $225.9 million.

Fiscal fourth-quarter revenue should increase 3% to 5% from the third quarter, and its loss from operations is expected to be $174 million to $184 million. CMGI lost $142.8 million in the year-earlier quarter on revenue of $377.2 million.

Second-quarter revenue from CMGI’s search and portals business fell to $55.2 million from $56.5 million a year earlier, and the company expects the unit to generate third-quarter revenue of $33 million to $35 million.

CMGI’s e-business and fulfillment unit posted revenue of $189.5 million, up from $56 million a year earlier, as a result of the success of the uBid online auction site. Because of the sale of Signatures Network, CMGI expects third-quarter e-business revenue to come in between $170 million and $172 million.

Internet professional-services revenue surged to $27.5 million from $2.3 million a year earlier, and is expected to be $24 million to $26 million in the third quarter. Infrastructure and enabling technologies revenue tripled to $36 million in the second quarter from $12.3 million, and is forecast to come in between $27 million and $29 million in the current period. Interactive-marketing revenue rose 10% to $34.6 million, and CMGI expects third-quarter revenue of $26 million to $28 million.

CMGI said it is making “significant” progress to reduce its dependence on advertising-derived revenue in favor of more stable licensing and enterprise-derived revenue.

In a conference call, Mr. Wetherell said CMGI has been approached by other companies interested in purchasing all or part of its NaviSite Inc. (NAVI) unit. NaviSite, which issued a dour outlook for the rest of fiscal 2001 last week, has hired Goldman Sachs Group Inc. to advise it as the Web-hosting company considers the acquisition offers and other alternatives.

A sale of all or part of NaviSite would continue CMGI’s efforts to sell off assets as it hastens its pursuit of profits. CMGI said in September it would cut the number of its majority-owned units to between five and 10 from 17 at the time. It now has 12 units, and said Tuesday it might sell its Activate and AdForce units.

Excluding its NaviSite and Engage Inc. (ENGA) units, CMGI’s cash-burn rate was $185 million in the second quarter, Mr. Wetherell said. The company expects to exit the fourth quarter with a burn rate of $75 million to $85 million. Mr. Wetherell said CMGI expects to have $600 million to $700 million at the end of fiscal 2001, assuming it is successful in its current plans to sell assets. If those sales take longer, the company should have more than $500 million in cash.

Despite the persistent downturn among Internet and technology stocks, CMGI said Friday that its venture-capital unit will continue to provide funding to Internet start-ups. The company said Tuesday it plans to spend about $15 million in venture-capital funding during both the third and fourth quarters.

Copyright (c) 2001 Dow Jones & Company, Inc.