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   Technology StocksInformation Management Associates - (IMAA)


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To: TFF who wrote (135)8/24/1999 11:37:00 PM
From: TheLineMan
   of 165
 
I guess finding 4 new investments a month isn't that easy- sraping the barrel now. Is that why the did the deal with IMAA. As well as getting 29% of IMAA they had to give away a bunch of warrants at $4 and $6.20. I wouldn't say CMGI are confident in this venture - would you?

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To: TheLineMan who wrote (137)8/25/1999 12:14:00 AM
From: TheLineMan
   of 165
 
Sorry about that - I got called at a critical point in that message the 29% I was referring to was buyingedge.com not IMAA.

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To: TheLineMan who wrote (137)8/25/1999 9:20:00 AM
From: TFF
   of 165
 
Actually CMGI got 20% of buyingedge.com for 7.5 mil + warrants to buy @ 4.5 and @6.2.

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To: TFF who wrote (135)8/25/1999 10:49:00 AM
From: LTK007
   of 165
 
TFF you keep forgetting the publihed time frame to bring buyingedge out as a an IPO is 1.5 to 2 years!(by then IMAA may be a Q stock)
Also by making 4 venture capital investments per month they are well aware that only maybe 1 in 4 will be a winner-the rest will become write-offs.
That is the nature of venture investment--if they only have one in 4 winners they still clean-up.
Max90

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To: LTK007 who wrote (140)8/25/1999 10:55:00 AM
From: TFF
   of 165
 
Where do u get 1 1/2 to 2 yrs?

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To: TFF who wrote (141)8/25/1999 12:54:00 PM
From: LTK007
   of 165
 
TFF don't me make go on a dig ---if you search it's in one of the
items posted--the NYT article or one of the DJ releases--I will when I have time this evening go re-dig up the source.
But to balance that where do you have a source that says it is a neear term IPO?
BTW,one of my favorite stocks has finally started to run--
I am NOT! in it now,but I am ALWAYS glad to see a stock I
recommended take off--it is a internet related stock Paradyne,PDYN and easily deserves to run with the likes of CMTN and RBAK---may enter now,may not I am sort of taking it easy these days.Max90

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To: LTK007 who wrote (142)8/25/1999 12:59:00 PM
From: TFF
   of 165
 
yes PDYN hot..along w/ FFIV

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To: LTK007 who wrote (142)8/25/1999 10:38:00 PM
From: loe4net
   of 165
 
OOPS!!

Guess I missed on this one today.

Loe

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To: loe4net who wrote (144)8/27/1999 3:07:00 PM
From: ArtAlley
   of 165
 

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To: Evan Dimmer who wrote ()8/30/1999 5:27:00 PM
From: TFF
   of 165
 
Pushing the envelope
Cyberstock Elite 08/25/99 7:00 PM
By Matt Ragas

Possibly no one understands the concept of doing things in "Internet time" better than David Wetherell, the chairman and chief executive of prominent Internet venture investor CMGI (CMGI). After all, only four short years ago, CMGI was a sleepy direct-marketing company that found itself suddenly bitten by the "Internet bug." At the time, becoming a pure-play Internet incubator and holding company was still a foreign concept among even the most risque venture capitalists on Sand Hill Road in Silicon Valley.

Let's fast-forward a few years. Today, CMGI boasts a market capitalization north of $8 billion, and is responsible for being the original backer of incredibly successful Internet companies like Lycos (LCOS) and GeoCities, which was acquired earlier this year by Yahoo! (YHOO). In addition, CMGI has built up a vast portfolio of over 40 Internet operating companies that includes stakes in publicly traded Internet companies like Critical Path (CPTH), Chemdex (CMDX), Silknet (SILK) and Engage (ENGA). Quite simply, CMGI has proven time and time again that it is on the cutting edge of shaping and building the Internet economy. This might help explain why CMGI has attracted powerful minority investors that include Intel (INTC), Microsoft (MSFT), Sumitomo, and now Compaq (CPQ). All of these tech leaders want a piece of the future of the Net, and CMGI is there to help lead the way.

Clearly, this pioneering Internet investment company shows no signs of slowing down. At the end of June, CMGI announced that it would acquire 83% of Top Ten portal site AltaVista from Compaq for $2.3 billion in stock. The blockbuster deal now makes computing giant Compaq the largest outside shareholder in CMGI, and gives CMGI an incredible platform to tie in a variety of its other portfolio companies. In addition, CMGI continues to push the envelope on the Net with the recent launch by AltaVista of a free Internet access service, which has already attracted over 225,000 subscribers in less than two weeks. We recently sat down with David Wetherell to discuss CMGI's vast array of portfolio companies, as well as where he sees the Internet industry heading in the next few years.

Company: CMGI (CMGI)
Wednesday's closing price: 84 15/16
Market capitalization: $8.1 billion
52-week range: 8 5/8 - 165
Summary: Internet holding company
Cyber-CEO: David S. Wetherell, Chairman, Chief Executive Officer, and President

CyberStock: How many more IPOs of CMGI majority-owned or portfolio companies are you hoping to get out of the gate this year?

Wetherell: If I had to pick an average over the next 12 months, it would be an average of one a month.

CyberStock: Let's talk about this recent correction in Net stocks. What's really causing this?

Wetherell: I think it's mostly just a typical pause that occurs every now and then in the Internet sector. You get a glut of IPOs. There's a lot of money that's interested in investing in the Internet, but there are more options.

CyberStock: Is it just too many Internet offerings and not enough high-quality ones right now?

Wetherell: No, I think that's probably some of it. I think the market needs a little more time to wade through what's quality and what isn't. They're starting to discover and learn more and more about it. I remember back in '96 there was a big downturn, and all the search engines went dramatically below their IPO prices. They weren't viewed as having viable business models. People were even questioning if the Internet was real itself, and even if it would be around. I think some education in the market occurred; [investors] realized that the search engines were for real, that they were major portals, and millions of people needed to aggregate there before they went off to their final destinations. The biggest thing people really use the Internet for is to find stuff, and that's not going to change. It's the biggest library in the world, and getting bigger. Now there's another education process going on: what e-commerce models will work? Not everyone's going to be able to make money off razor-thin margins and grab giant market share. There are some, though, with proprietary products or business-to-business solutions that are more protected technical applications.

CyberStock: I guess that brings up some of the recent investments CMGI has made. There seems to be a heavy emphasis on auction models or online marketplaces that connect buyers and sellers.

Wetherell: We like aggregation areas. We like anything that's viral, where you've got a service or product that really draws a lot of people, and will tend to draw even more people, like MyFamily.com. You put up a site for your family, and then you tell the rest of your family about it, and they come in and tell other people, or they do it themselves. Or ONEList, or any of the types of auction sites. You can go around from auction site to auction site and try to figure out where the best price is, or you can have a service do it for you. Those types of things just make sense. That's the kind of thing that passes very well by word of mouth.

CyberStock: But isn't one of the keys of a BizBuyer, Productopia, or BuyingEdge that it's really "frictionless"? These companies are never really having to handle product. They're really collecting some type of fee for bringing together buyers and sellers.

Wetherell: That's right. It's something that everybody needs, so there's an opportunity to aggregate that interest.


CyberStock: And you don't have the "heavy lifting" of an Amazon.com (AMZN).

Wetherell: Right. I'm not sure how you make money with that model.

CyberStock: Well, Amazon has built an amazing number of customers at this point, and they can expand into a million different verticals - and they're doing that. However, revenue growth is slowing down, losses are rising. I think more than ever, people wonder if Amazon can ever build a profitable model.

Wetherell: I think that once they have enough customers, they can probably command larger margins on what is sold because they have the eyeballs; they have the traffic. They'll also probably be able to purchase companies themselves that have fairly significant exclusive products. Some companies out there own whole niches or most of a niche, like LVMH (LVMHY), which is by far the largest luxury goods company in the world. They never have a sale. If they set up their own portal on the Web, their margins can stay protected because you can't buy it anywhere else.

CyberStock: They've got the exclusive, in effect.

Wetherell: So Amazon needs some exclusive products. They can get them a couple of different ways. They can bargain to be the exclusive distributor on the Web because they have traffic, and they can target that traffic well down the road. Presumably, that's probably what they'll do. They can also purchase product exclusively.

CyberStock: With Amazon's recent shift into making private investments in e-tailers like Drugstore.com (DSCM), Pets.com, Gear.com, and HomeGrocer.com, do you view Amazon as a potential competitor for deals now?

Wetherell: No, not really. They've gotten into videos, where they compete with the investment we sold to Hollywood Video, so to an extent they are. But I still think that companies who focus in a given large niche are going to be able to do a better job than someone who is trying to be everything to everybody. In other words, the content and services such as "What Ails You" at MotherNature.com are far greater than what you'll find at an Amazon. Perhaps if they really focused on that, Amazon could do it as well, but how many of those can they focus on? They can't boil the ocean. I always think that companies that focus really well - and there's also special applications that can be built - are themselves the real barriers to entry. It's not aggregating product - anybody can do that - it's the content and the applications customized around the product.

CyberStock: When you've decided to back e-tailers, you've gone after ones that have more of a niche orientation that you view as defensible, like Furniture.com or MotherNature.com

Wetherell: Yes, there's always got to be something defensible. In the case of MotherNature.com, they've got really great proprietary content. Furniture.com talked about a lot of the stuff that they're now delivering, such as the ability to format a room online. You can actually take your furniture, place it in a virtual room, and see how much space it's going to take up and what really fits well where. Those kinds of applications Amazon can't just build overnight. If you're going to want furniture, are you going to go to Amazon.com or Furniture.com?

CyberStock: AltaVista recently launched their own free ISP. Is there a real underlying economic model for free ISPs, where it can be totally supported by advertising and e-commerce? Or is this a case where the ISP becomes a loss leader to retain existing customers and attract new eyeballs to the portal?

Wetherell: There's certainly a real economic model. With improved targetability from products like Engage, you can derive higher CPM rates. (Editor's note: "CPM" stands for "cost per thousand," the "M" representing the Roman numeral for 1,000. A $20 CPM means an advertiser pays $20 per 1,000 ad impressions.) And with declining bandwidth costs from services like Navinet, you have a lower hurdle to jump over to break even, if you're trying to make money off of a free model. You get to a point where you can justify - there will be enough ad impressions - giving away the Internet access. I think people are anticipating that day and age, and that's why they're getting going on it now. With AltaVista, they aren't bearing any of the costs of the bandwidth; they're sharing revenue, I think, on the ads.

CyberStock: How do you think this whole "free PC" craze is going to play out? Are these recent rebate deals from people like Prodigy, Microsoft's (MSFT) MSN, and America Online's (AOL) Compuserve - where the actual PC basically becomes free if you sign up for an extended ISP deal - something that is here for the long term, and that every box maker will have to adapt their pricing models to?

Wetherell: It's six and one half dozen of the other, whether you give away the Internet access or you give away the box. You're paying for it somewhere, and I think that the cat's out of the bag. There's no going and putting it back in now. It's something that every hardware manufacturer, every ISP, every portal has to deal with.

CyberStock: How does this really affect CMGI companies, then?

Wetherell: First of all, what do you need to succeed with that? You need the lowest-cost bandwidth, the best targetability, someone that can sell the ads for you…

CyberStock: Like Engage, AdSmart, and NaviNet…

Wetherell: You may need someone to host your portal, which is NaviSite, and so on. In a way, we're "picks and shovels" to a lot of the Web.

CyberStock: So you're saying you already have the turnkey package to play this game.

Wetherell: We've been anticipating free Internet forever. It's all coming down to that. Everything's going to be free. You'll still pay for your hardware for the next few years, or you'll get it for free and pay for something else.

CyberStock: Let's look five years out. Will broadband services like cable modems and DSL even become "free" eventually?

Wetherell: I think eventually. I really do. I think you'll have a free and a kind of pay-per-view quality. You'll have your free service, which is maybe a set of basic options and certain channels, like basic cable. Then you'll have your premium packages, which you'll pay more money for.

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