Martinas B.

CMGI stock update Feb. 14 2007

by Martinas B. February 20, 2007
It has been almost a decade since CMGI dominated internet news making one "brilliant" financial maneuver after another. In those days, CMGI sported a stock price of $160 and a market valuation near 20 billion dollars. CMGI brought legitimacy to the notion that a "business incubator" is a viable model.

When the industry fell out of grace in early 2000 CMGI was not spared. Shareholders watched their stock decline over 99% in value. In 2003 many internet companies began to recover. Ebay, Amazon, and Yahoo started to see strong profits and some even went on to hit new highs surpassing the 1999 bubblistic valuations. CMGI had a series of false starts only to find more problems.

For the last year the stock has been lingering between $0.98 and $1.55 these prices still represent a greater than 99% decline from their peak in 2000. But the suffering for shareholders may be coming to an end shortly. On one Friday the 13th in October of 2006, CMGI stock traded an eyepopping 24.5 million shares and increased 15% that day.

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Sources site the increased activity being caused by the company's operating income more than doubling. It could also have been rumours circulating of an impending sale of one of CMGI portfolio companies. This sale according to the November announcement will bring 165 million dollars in cash to CMGI.

On February 8th, James Altucher from the Street.com wrote up CMGI saying the stock looked attractive at these levels and went on to site that they had 200 million in "net cash" and a current enterprise value of 420 million. This would represent 9x cash flow of $47 million. It appears that Mr. Altucher is not taking into account the recievable of $165 million that is a result of the sale Avamar sale to EMC.

While we haven't seen the balance sheet updates, we will speculate what their balance sheet can look like after the sale in the table below. Clearly, this transaction will have a strong positive impact on CMGI's balance sheet, and operating position. When we factor in the impact of the Avamar Subsidiary, CMGI would have 365 million Net Cash and an enterprise value of 285 million. At 6x cash flow this is quite an attractive opportunity. We would like it even better at a new 52 week high.


 


 



CMGI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS FROM 10-Q
With Estimates of how the recent subsidiary sale can impact the balance sheet
HOTSTOCKED.COM Changes in Bold

(In thousands, except share and per share amounts)

(Unaudited)

 

                 


October 31,
2006


HOTSTOCKED
ESTIMATE

ASSETS
     
     

Current assets:


     
     

Cash and cash equivalents


$ 130,280

$ 295,000

Available-for-sale securities



1,756


1,756

Short-term investments



90,200


90,200

Accounts receivable, trade, net of allowance for doubtful accounts of $1,157 and $1,123 at October 31, 2006 and July 31, 2006, respectively



201,602


201,602

Inventories



93,832


93,832

Prepaid expenses and other current assets



14,323


14,323

Current assets of discontinued operations



103


103
                 

Total current assets



532,096


697,096
                 

Property and equipment, net



50,003


50,003

Investments in affiliates



24,461


24,461

Goodwill



181,388


181,388

Other intangible assets, net



15,334


15,334

Other assets



2,981


2,981

Non-current assets of discontinued operations



14


14
                 
 
$ 806,277

$ 971,277
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
     
     

Current liabilities:


     
     

Current installments of obligations under capital lease


$ 341

$ 341

Accounts payable



181,509


181,509

Current portion of accrued restructuring



4,679


4,679

Accrued income taxes



6,328


6,328

Accrued expenses



50,593


50,593

Other current liabilities



2,775


2,775

Current liabilities of discontinued operations



3,326


3,326
                 

Total current liabilities



249,551


249,551
                 

Revolving line of credit



24,786


24,786

Long-term portion of accrued restructuring



5,755


5,755

Obligations under capital leases, less current installments



488


488

Other long-term liabilities



13,010


13,010

Non-current liabilities of discontinued operations



3,315


3,315

Stockholders’ equity:


     
     

Preferred stock, $0.01 par value per share. Authorized 5,000,000 shares; zero issued or outstanding at October 31, 2006 and July 31, 2006







Common stock, $0.01 par value per share. Authorized 1,405,000,000 shares; issued and outstanding 484,607,756 at October 31, 2006 and 483,948,888 shares at July 31, 2006



4,870


4,870

Additional paid-in capital



7,456,387


7,456,387

Accumulated deficit



(6,957,988 )

(6,957,988 )

Accumulated other comprehensive income



6,103


6,103
                 

Total stockholders’ equity



509,372


674,372
                 
 
$ 806,277

$ 971,277
         


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