CMGI, Inc.

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CMGI, Inc.

1100 Winter Street, Suite 4600
Waltham, Massachusetts 02451
U.S.A.
Telephone: (781) 663-5001
Fax: (781) 886-4884
Web site: http://www.cmgi.com

Public Company
Incorporated: 1968 College Marketing Group
Employees: 4,100
Sales: $1,06 billion (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: CMGI
NAIC: 511210 Software Publishers; 523999 Miscellaneous Financial Investment Activities

CMGI, Inc., provides technology and e-commerce solutions that assist businesses to market, sell, and distribute their products and services. Through its subsidiaries, ModusLink and SalesLink, CGMI provides targeted solutions including supply chain management and web-based distribution and fulfillment. In addition, the company's venture capital affiliate, Ventures, invests in a range of technology companies. CMGI offers a variety of services and solutions, including inventory management, sourcing, manufacturing, configuration and assembly processes, EDI solutions providing direct connections with customer information 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 promotional and collateral products by assembling and shipping the items requested. In addition, the company provides print on demand solutions, product and literature inventory control and warehousing, reporting, research and analysis, shipments, billings, back orders, and returns. The company serves a broad array of clients, such as software publishers, hardware manufacturers, telecommunications companies, broadband and wireless service providers, and financial institutions. The company's global reach includes operations in the United States, Canada, United Kingdom, the Netherlands, Hungary, France, Singapore, Taiwan, China, Malaysia, and Ireland.

Beginnings

CMGI, Inc., was founded in 1968 as College Marketing Group by Glenn and Gail Mathews who aimed to sell lists of college courses and names of college faculty to textbook publishers. In 1986, David Wetherell assumed control of the small direct marketing company in a leveraged buyout, renamed it CMG Information Services, and took it in a new direction—cyberspace. The company went public in 1994, selling 1.2 million shares at $8 each. That same year, with $900,000, the company created Booklink Technologies, one of the world's first commercial 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 capital firm, @Ventures, to fund and nurture promising new technology 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 $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. CMG also launched Planet Direct, a developer and distributor of wired and wireless customer portal services, and Adsmart, an online advertising network (now part of Engage Media). CMG forays into the Internet arena caught the attention of Microsoft and Intel, both of which took just under a 5 percent stake in the company in 1997. With CMGI's expanding portfolio of Internet firms, the Internet incubator company sought to become a fully developed Internet and operating development firm.

In 1998 the company formed @Ventures III, a $282 million capital venture fund geared toward expanding investments in Internet and technology companies. CMGI contributed 20 percent to the fund with the remaining 80 percent capitalized by outside limited partners. The fund invested in a range of enter-prises, including MyFamily.com, Promedix, ONElist.com, Furniture.com, Hotlinks, Asimba.com, Virtual Ink, RagingBull, WebCT, Visto.com, MotherNature.com, Critical Path, and Tickets Live. The company's partnership with the Sumitomo Corporation helped boost CGMI's Internet business in the rapidly expanding Japanese market. The company also acquired Accipiter, an ad serving technology platform, and merged it into Engage Technologies, its Internet marketing firm. In addition, by merging its acquisitions of InSolutions and OnDemand Solutions into its subsidiary, SalesLink, the company believed 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 Critical Path, Silknet Software, and Ventro Corporation. It also made five strategic sales, including GeoCities to Yahoo! and Raging Bull to AltaVista. Among the Internet firms added to CMGI's portfolio in 1999 were Oncology.com, Snapfish, Spotlife, Vcommerce Corporation, Gamers.com, Dormania.com, FindLaw, Boatscape.com, Mondera.com, Idapta, Hotlinks, AuctionWatch.com, Radiate, CarParts.com, PlanetOutdoors.com, Exp.com, BizBuyer.com, Productopia, eCircles.com, OneCore.com, and NextMonet.com. The company also announced a $100 million initiative to build and launch iCAST, a new majority-owned operating company focused 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 verification and analysis, and Adknowledge, a provider of web marketing services. CMGI merged the two enterprises into Engage as wholly owned subsidiaries. These acquisitions and mergers, together with the $500 million acquisition of AdForce, a web ad management company, and the $11.3 million purchase of Flycast, an Internet advertising network, helped to boost CMGI's position and services in the online marketing and advertising field. CMGI further expanded its Internet service offerings with the acquisition of 1stUp.com, an Internet advertising provider. The company also acquired Activerse and Tribal Voice, merging these providers of instant messaging and interactive communication solutions under the Tribal Voice name. CMGI bolstered its e-commerce and fulfillment services with the acquisition of ExchangePath (formerly 1ClickCharge), an online payment solution provider, and folded ZineZone and Signature Networks into iCast to expand its online entertainment offerings.

On March 18, 1999, moreover, the company joined the Nasdaq 100. In June, it bought an 83 percent stake in search engine AltaVista from Compaq, then filed to take it public. The IPO, however, was delayed when the Nasdaq proved erratic, and finally withdrawn in 2001 with the plunging markets. In October the company completed the initial public offering for NaviSite, selling 5.5 million shares at $14 each. In December, CMGI launched CMGI Solutions, a new majority-owned operating company focused on providing e-business solutions. During 1999, shareholders received a boost when CMGI formed a direct share program allowing shareholders to participate in IPO's of CMGI companies. The firm also jettisoned part of its past after selling its lists and database services unit CMG Direct. In addition, the company set up @Ventures B2B Fund to focus on business-to-business Internet investments.

In early 2000, the company continued to expand its holdings with new mergers and acquisitions. The company's various @Venture funds invested in a variety of Internet and technology firms, such as TheRealm, Corrigo, Alibris, Ironmax, The EC Company, Dialpad.com, Tvisions, OneMediaPlace, Dejima, Gofish.com, MobileLogic, AnswerLogic, Industria Solutions, NextOffice.com, FoodBuy.com, Half.com, and Knowledge First. The company also sold several firms, including Silknet Software to Kana Communications, Half.com to eBay, and eGroups to Yahoo! At the same time, CMGI acquired Adsmart and together with Flycast merged it with Engage. The company further acquired yesmail.com, an outsourcer of permission email marketing technologies and services, and added online auctioneer uBid. CMGI acquired e-commerce software developer Tallan Inc. for $920 million and merged it with CMGI Solutions, the company's e-business software firm. In October, CMGI Solutions subsequently 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 invested $1 billion into the formation of @Ventures Technology Fund, focusing on web enabling technologies. The company also expanded its investing through partnerships that included CGMI Asia with a unit of Pacific Century Group; wireless broadband Internet service provider SoftNet Zone with SoftNet Systems, Cisco Systems, Compaq, and Nokia; and Internet profiling services company CMGion with Compaq, Novell, 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 access field.

Company Perspectives:

CMGI, Inc. provides technology and eCommerce solutions that help businesses market, sell and distribute their products and services. Through its subsidiaries ModusLink and SalesLink, CMGI offers targeted solutions including industry-leading global supply chain management and web-based distribution and fulfillment. In addition, CMGI's venture capital affiliate, @Venture, invests venture capital in a variety of technology ventures.

Collapse of the Internet Bubble: CMGI Restructures

By the time of the crash of the Internet bubble, CMGI's portfolio included 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 loss for 2001 of $1.27 billion, nearly double its net loss in the same quarter the year before. CMGI chairman and chief executive David Wetherell, who had bought the firm in 1986, said the company would pursue a strategy of spinning off underperforming and non-strategic assets in order to focus on core profitable businesses.

As a result, the company ceased funding the operations of NaviPath, the interest access provider, and sold its webcasting firm Activate.com 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 Bull, 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 its debt and equity interests in Signature SNI, Inc. in November. At the end of the 2002 fiscal year, CMGI's net loss totaled $524.9 million.

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 Peter Bourdon. In April 2003, Overture Services, Inc., acquired AltaVista for $60 million in cash and 4,274,670 shares of Overture common 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 operating facility in Miskoic, Hungary. The new facility added to the company's other locations in Ireland and The Netherlands. In August, the company acquired Modus Media, which it folded into its supply chain management business, SalesLink. The combined businesses were reorganized as ModusLink with the SalesLink marketing distribution services business continuing under the SalesLink name. CMGI announced the appointment of a new president and chief executive officer in August. Joseph C. Lawyer took over the post from George A. McMillan, who oversaw the company's restructuring from an Internet operating and development firm to a global integrated solutions provider. Lawyer came from RR Donnelley's (RRD), where as vice-president he diversified RRD's holdings by pursuing growth in emerging markets, international start-ups, and acquisitions.

In a further sign of recovery and renewed expansion, the company's subsidiary, ModusLink, expanded its Utah operations in August 2005 by opening a new facility in West Valley. The expansion stemmed from increased demand for ModusLink's supply chain solutions within the technology market. The new facility provided a broad range of forward supply chain services, such as supply chain design and consulting, just-in-time materials planning and procurement, inventory management, assembly and packaging, and fulfillment to client's distribution centers, retail partners, and end users. ModusLink also opened a facility in Bron in the Czech Republic, offering clients a low cost infrastructure and strong transportation grid, enabling products to be shipped to and from key distribution points for final delivery to countries in Europe or outside the region to the Americas or Asia. For the 2005 fiscal year, the company reported net revenue of $1.1 billion, an increase of $672.3 or a 169 percent increase over 2004. CMGI attributed the improved performance largely to the acquisition of ModusLink, which provided significant financial benefits driven by its global supply chain services business. In October 2005, CMGI announced that its WebCt Inc. unit was being acquired by education software maker Blackboard Inc. for $180 million in cash. The parties expected the transaction to close by the end of the year or in early 1996, pending regulatory approval.

Principal Subsidiaries

ModusLink Corporation; SalesLink Corporation.

Principal Competitors

Internet Capital Group Inc.; Optiant Inc.; Redprairie Corporation.

Key Dates:

1968:: Company founded as College Marketing Group.
1986:: David Wetherell assumes control of firm in leveraged buy out.
1994:: Company goes public, selling 1.2 million shares at $8 each.
1995:: Company forms world's first Internet-only venture capital firm, @Ventures.
1999:: Company joins Nasdaq 100.
2002:: Company restructures, spinning off many of its Internet holdings.
2004:: Joseph C. Lawyer becomes CMGI's new president and CEO.