In posts #30620, and #30625, I wrote Parts I and II about valuing CMGI. I will complete my series tonight with Part III: Qualitative factors and Summary.

As a housekeeping note, I have finally been able to verify that CMGI does indeed own shares of AMZN. This dates back to Aug 1998, when CMGI sold its stake in Sage Enterprisesn to AMZN in exchange for 225,558 shares of AMZN. After the 3:1 and 2:1 splits that AMZN has gone through, CMGI now owns 1,353,348 shares of AMZN. (source: 10/29/99 10-K filing; it's quite a long and comprehensive source of information on CMGI, which is why I didn't see that bit of information at first)

I haven't been able to verify CMGI's ownership of IFMX, OMKT, and USWB, so if anyone out there can offer a web link, that would be great.....


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Part III: Qualitative factors and summary

In looking at CMGI, I originally had three qualitative factors I wanted to discuss (strong management, valuing CMGI's non-public assets, and the synergies in the CMGI Network), but now, I have a more ambitious plan. Let's take a look at how CMGI stacks up against the following criteria:

The top dog and first-mover in an important, emerging industry...

Admittedly, the idea of providing seed capital to help start up companies is not new. Many institutional brokerage houses have been doing it for many years. However, the idea of incubating Internet companies, is newer. This may not sound like an important industry in Y2000, but perhaps back in 1995, trying to make a business out of incubating Internet companies was unheard of, let alone being successful at it. As for CMGI, it has jumped to the forefront by either incubating companies or investing into existing companies that are competing in RuleBreaking industries.

Internet b2c e-tailing -
This is the idea of selling consumer products over the Internet similar to what AMZN is doing. CMGI has been at the leading edge of this industry through the following companies:
http://www.cmgi.com/network/ecommerce.html

B2b e-commerce systems -
This is another Rule Breaking industry where a marketplace is set up for businesses to buy/sell non-consumer products from other businesses. CMGI is involved in this industry through the following companies:
CMDX
BizBuyer.com
@Ventures B2B technology fund.

Internet advertising -
The internet was originally seen as a supplement to conventional marketing methods, but now, a new paradigm has emerged, where advertising on the Internet has its own rules and standards of what works separate and distinct from conventional marketing methods.
http://www.cmgi.com/about/index.html
CMGI has also been involved in this RuleBreaking industry through the following companies:
http://www.cmgi.com/network/marketing.html

Is CMGI itself breaking any rules? Well, as I mentioned in Part I of my report, CMGI doesn't earn income like a regular company. And it doesn't receive a steady stream of income like regular companies. The business model on which it is sucessfully carrying out pretty much qualifies it as breaking the rules on how to generate income and profits. Furthermore, the landscape in which CMGI operates is constantly evolving and changing. For CMGI to not only embrace the radical changes in our Internet economy (by constantly making lucrative and successful investments into young Internet companies), but to actually extend it (eg. CMGI Asia, @Ventures investment into companies in India), really goes above beyond breaking the rules. How else can I describe it?
Is CMGI the top dog in its industry? Well, as hard as the Wall street analysts find it to value CMGI, even they recognize CMGI as one of the "four horsemen" of the Internet (the other 3 being AOL, YHOO, and AMZN). If I had to classify CMGI as a dog of some kind, it would as "a supreme only dog." There really isn't any company out there that is trying to do what CMGI is doing in building a vast, multi-industry, network of companies that collaborate together in achieving business objectives. SFE (a potential competitor, if you can call it that) is better off being compared with CMG @Ventures, ICGE is better off being compared with @Ventures B2B Technology Fund, and RRRR is better off being compared with CMGI Solutions. And not to downplay the merits of ICGE, but I feel I must say that CMGI has an anwser to ICGE's VERT (in CMDX with its new business focus), but does ICGE have an answer to CMGI's @Ventures Inc. and CMGI Solutions?
And for further signs of CMGI as being a "supreme only dog", we see many companies today (like 1186.HK) who want to duplicate what CMGI has been doing because it's lucrative, and CMGI has shown the way to how it could work.


Sustainable advantage gained through business momentum, patents, visionary leadership, and/or inept competition...

CMGI, through wholly owned subsidiaries and/or @Ventures investments, has established a very impressive and significant network of over 60 companies:
http://www.cmgi.com/investor/main.html
At first I thought that the synergy behind this CMGI Network would be something like ALTA using 1stUp to provide free internet access service, and ENGA to provide advertising sources. However that is not the case. The CMGI Network derives its synergies from:
a) Sharing technologies -
When CMGI acquires a company, it actually has a list of companies in the CMGI Network which may actually benefit from the acquisition target's technologies.
b) Sharing management insights and expertise -
The brainstorming sessions between the CMGI Network of companies is really a unique feature of CMGI which strengthens the whole company.
c) Cross marketing

Ever tried to keep track of 60 companies? How about 120 companies? There must be an aspect of visionary leadership if you're attempting to do such a thing. For further signs of visionary leadership, look no further than to the Chairman and CEO of CMGI himself. He has led CMGI to grow companies as a gardener would grow crops of plants. And like a node in a network, each wholly owned subsidiary of CMGI (ie. ALTA, ENGA, NAVI, @Ventures Inc, CMGI Solutions, Tribal Voice, iCAST, 1stUp.com, 1ClickCharge, Activate.net, Adsmart, AdForce, SalesLink, and Equilibrium) all have their own management team.

Excellent past share appreciation, measured by a relative strength of 90or higher...
CMGI's 12 Month (TTM) ROI is 250%. The following chart shows that the 3 month, 6 month, 1 Yr, and 2 Yr ROI of CMGI is superior to EBAY, AMZN, and YHOO (click on time frame to see the various time periods):
http://www.bigcharts.com/intchart/frames/frames.asp?symb=cmgi&time=6&freq=1&comp=amzn%2Cebay%2Cyhoo


Good management and smart backing...
David Wetherell, is the most astounding Chairman and CEO that I have never met. It's hard for me to remain objective about how he applied his wizardry to create wealth with ENGA, ADFC, and FCST. Can you imagine anyone who can strategize the best actions for a company to take, meet with many other top level executives all day, negotiate the best deals for a company's services, facilitate conference calls with wall street analysts, envision how a company can successfully execute its business plan, ensure that CMGI shareholders have the opportunity to purchase shares of a CMGI wholly owned subsidiary that is about to go public, and still take time to answer any/all of your questions about CMGI?
And how about the Wizardrell claiming that LCOS (which some considered was overvalued last year) was worth more than what USAI was offering?
http://www.upside.com/David_Bunnell/386b61790_yahoo.html
CMGI's success in the past 5 years is an attribute and a reflection of the kind of person that David Wetherell is.
In the rare event that CMGI needs smart backing, here are the companies that have invested into CMGI:

MSFT: 7,527,632 shares
INTC: 6,086,024 shares
Sumitomo: 5,000,000
1186.HK: 8,115,942
CPQ: 39,344,000

The greater the consumer brand, the better...
CMGI may not have great brand awareness from the consumer, but some of the companies in the CMGI Network have respectable brand awareness (eg. ALTA, LCOS). There certainly is brand awareness with the financial media, as there are so many articles about CMGI in the daily newsfeeds.

A significant constituent of the financial media is recently on record for calling it overvalued...
Well, I don't know of any Wall Street analyst brave enough to call CMGI overvalued (probably because they're still trying to figure out how to value it).
However, there is one constituent of this board (made significant by his postings) who claims that CMGI is "ridiculously overvalued."



Valuing non-public assets
So, this is where you, the reader, gets involved.
How much would you pay for $1 of sales (or $1 of earnings) for the following companies:

Tribal Voice
1stUp.com
CMGI Solutions
iCast
1ClickCharge
Equilibrium
SalesLink
@Ventures Inc, 
Activate.net
Equilibrium

Now, how much would you pay for those companies, with the additional knowledge that CMGI is involved in the management and/or operation of those above companies?



Summary

1) McNulty is either very crazy, or very brilliant for being 100% invested into CMGI, but at least I know understand better why he's doing it.

2) I feel that you can value CMGI in the above 3 ways:
a) ascertain a current value for all of CMGI's marketable assets
b) compare the growth rate of those assets with the share price of CMGI
c) look at some cash - centric metrics for CMGI.

3) CMGI is well positioned to embrace the Internet revolution, and the Wizardrell will extend his vision to all parts of the globe.

4) In true Rule Breaker fashion, CMGI will always have that aspect which defies any attempts to analyze or value it, but it is that very aspect about CMGI which makes it very attractive in the long run.