Opinion on  CMGI Inc. (CMGI)     Sector: Financial  >  Industry: Misc. Financial Services
A comeback play

About ModusLink

ModusLink Corporation is a leading provider of global, end-to-end supply chain management solutions. The company provides technology clients in the software, computing, consumer electronics, storage and communications markets with customized supply chain solutions that improve time-to-market, productivity and customer satisfaction while reducing risk and cost. ModusLink's services include consulting and planning, sourcing and supply base management, manufacturing and product configuration, fulfillment, logistics management, e-commerce and the complete range of aftermarket services. With 40 facilities in 13 countries, ModusLink has the largest global footprint in its industry. The company is headquartered in Waltham, Massachusetts and is a subsidiary of CMGI, Inc. (Nasdaq: CMGI - News). For additional information, see www.moduslink.com.

About CMGI

CMGI, Inc. (NASDAQ: CMGI - News), through its subsidiary ModusLink, provides industry-leading global supply chain management services and solutions that help businesses market, sell and distribute their products around the world. In addition, CMGI's venture capital business, @Ventures, invests in a variety of technology ventures. For additional information, see www.cmgi.com.

Once the bull gets bullish, onbody can stop it.

Once the bull gets bullish, nobody can stop it.

TheStreet.com Ratings: Stock Upgrades, Downgrades

By TheStreet.com Ratings Staff
3/14/2007 12:30 PM EDT

Each weekday, TheStreet.com Ratings updates its ratings on the stocks we cover. Our model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our buy, hold or sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

Some recent rating changes are highlighted below.

Real estate investment trust Newcastle ( NCT - Cramer's Take - Stockpickr - Rating ) has been downgraded to a sell from a hold. TheStreet.com Ratings feels the company has generally poor debt management and weak operating cash flow. Newcastle had been rated a hold since October 2005.

Kansas-based electric utility Great Plains Energy ( GXP - Cramer's Take - Stockpickr - Rating ) has been downgraded to a hold from a buy. GXP's revenues have grown at a paltry rate compared with those of its competitors. Revenues went up just 1.6% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. The average rate of revenue growth for the entire industry during that same time period was over 25%. Great Plains had been rated a buy since August 2006.

Biotech firm Biogen ( BIIB - Cramer's Take - Stockpickr - Rating ) has been downgraded to a hold from a buy. The company has developed drugs for the treatment of non-Hodgkin's lymphoma, multiple sclerosis and rheumatoid arthritis. The company has demonstrated earnings-per-share growth over the past two years, but that hasn't pushed up the price of the stock. The stock price has actually fallen 7.7% over the past year. TheStreet.com Ratings doesn't see anything in the company's numbers that would change the trend. Biogen had been rated a buy since November 2006.

Market research company Harris Interactive ( HPOL - Cramer's Take - Stockpickr - Rating ) has been upgraded to a buy from a hold. Earnings per share shot up 50% in the second quarter of fiscal 2007 compared with the same quarter a year ago. TheStreet.com Ratings expects more EPS growth in the future. Harris had been rated a hold since November 2006.

Business software and technology provider CMGI ( CMGI - Cramer's Take - Stockpickr - Rating ) has been upgraded to a buy from a hold. Net income went up a whopping 668% in the second quarter of fiscal 2007, translating into an 800% increase in earnings per share. Such stellar numbers have already pushed the stock price up; however, TheStreet.com Ratings feels there is still room to run. CMGI had been rated a hold since November 2005.

Additional ratings changes are listed in the table below.

TheStreet.com Ratings Stock Upgrades, Downgrades
Company Name	Ticker	Change	New Rating	Former Rating
Whittier Energy	WHIT	Upgrade	Buy	Hold
Acorda Therapeutics	ACOR	Initiation	Sell	n/a
EpiCept	EPCT	Initiation	Sell	n/a
AmComp	AMCP	Initiation	Sell
Magellan Midstream	MGG	Initiation	Sell
Rio Narcea Gold Mines	RNO	Downgrade	Hold	Buy
Levitt	LEV	Downgrade	Sell	Hold
Newcastle Investment	NCT	Downgrade	Sell	Hold
Citizens First	CTZN	Upgrade	Buy	Hold
Rex Stores	RSC	Downgrade	Hold	Buy
Great Plains Energy	GXP	Downgrade	Hold	Buy
Keane	KEA	Upgrade	Buy	Hold
Biogen Idec	BIIB	Downgrade	Hold	Buy
Harris Interactive	HPOL	Upgrade	Buy	Hold
AEP Industries	AEPI	Upgrade	Buy	Hold
Cimatron	CIMT	Upgrade	Hold	Sell
Clean Diesel Technologies	CDTI	Upgrade	Hold	Sell
CMGI	CMGI	Upgrade	Buy	Hold
Corus Bankshares	CORS	Downgrade	Hold	Buy
Source: TheStreet.com Ratings

"We believe that successful execution of these initiatives will enable the Company to increase its annual gross margin percentage to approximately 12% to 14%, compared to the fiscal 2006 gross margin of approximately 10%. The gross margin for the six months ended January 31, 2007 was approximately 11.6%. We also believe that these initiatives will allow us to reduce our overall selling, general and administrative, restructuring and amortization costs to approximately 7% of revenue. These actions are expected to result in an operating margin between 5% and 7%. We expect to make steady progress toward these goals and to be operating at this level by the end of fiscal year 2008. Among the key factors that will influence our performance against these goals are successful execution and implementation of our strategic initiatives, global economic conditions, especially in the technology sector, demand for our clients' products, and demand for outsourcing services.

For the three months ended January 31, 2007, the Company reported net revenue of $324.8 million, operating income of $11.3 million, income from continuing operations before income taxes of $41.7 million and net income of $35.9 million. For the six months ended January 31, 2007, the Company reported net revenue of $608.4 million, operating income of $16.3 million, income from continuing operations before income taxes of $50.0 million and net income of $46.2 million. We currently conduct business in The Netherlands, Hungary, France, Singapore, Taiwan, China, Malaysia, Ireland, the Czech Republic, Mexico and other foreign locations, in addition to our United States operations. At January 31, 2007, we had cash and cash equivalents, available for sale securities and short-term investments of $275.0 million, and working capital of $319.4 million. "

Very impressed!

Market Scan
CMGI Shows Signs Of Life
Matthew Kirdahy , 03.22.07, 1:30 PM ET

The way CMGI stock has been running harkens investors back to the days before the dot.com bubble burst at the dawn of the new millennium.

CMGI (nasdaq: CMGI - news - people ) stock, a hot ticket in the late 1990s into early 2000, got a mega boost this week from a healthy earnings report, hopeful guidance and a positive news story.

CMGI shares jumped for the second straight session Thursday, up 19 cents, or 9.9%, to $2.11 at midday, a new 52-week high, in heavy trading. That's a nice gain, but a far cry from the company's statrospheric levels during the Internet bubble. It traded above $153 in January 2000 but was below $1 over the summer of 2006.

The company began life as an Internet incubator, helping to finance small tech companies then trying to bring them to market. A notable success was the Alta Vista search engine, but CMGI, which featured several consumer-oriented companies in its portfolio, was battered in 2000 when the frenzy for all things Internet abruptly ceased.

CMGI is still in the incubator business, but it also has moved into supply-chain management for technology companies. The latter line is bringing improved results

In the company's second quarter, which ended Jan. 31, sales gained a modest 1.9%, to $324.7 million from $318.8 million a year earlier, but CMGI went from a loss of $6.3 million to a net profit of $35.8 million, or 7 cents a share. Of particular interest to investors, the company's gross margin rose significantly, to 12.5% from 9.5% in the previous year, indicating it is increasing the profits it makes on each dollar of sales.

CMGI attributed that improvement to "strong volumes in Asia from certain higher-margin programs, improved work mix in the Americas and new business wins and productivity gains in Europe."

The balance sheet also is improving. CMGI said it had working capital of approximately $319.4 million at the end of the latest quarter, up 23.0% from $259.7 million a year earlier. Of that, cash and short-term securities rose 68.7%, to $275.0 million.

For the current financial year, CMGI said it expected sales of $1.0 billion, which would be a little less than the $1.1 billion of last year. But it expects its gross margin to improve from last year's 9.9%.

The company got a positive review in Barron's over the weekend. The articlesuggested that Federal Express parent FedEx or United Parcel Service (nyse: UPS - news - people ) might find thelogistics business of interest. That set off a swirl of commentary in the blogosphere this week, where the memory of CMGI's heyday seems brighter than the dismal performance of its stock for most of the time since. Also drawing attention was a small investment by its incubator unit in a waste-to-ethanol producer.

CMGI is not the only Internet dinosaur whose shares are perking up. Internet Capital Group (nasdaq: ICGE - news - people ), whose stock traded above $4,000 on a split-adjusted basis at the height of the Internet craze and as low as $3 thereafter, is now trading at about $10.70. Safeguard Scientifics (nyse: SFE - news - people ), an $80 stock in 2000 and an 80-cent stock in 2002, has crept up to the $3 range amid improved prospects for its incubating holdings.

I bought it @ $1.33 and sold out @$2.21. There's a rumor that the company would like to make a 10 for 1 reverse split. If it's true, I will wait for a while for its cooling down. It has been doubled for this rally (from $1.23 to $2.50). Today is the 34th day yet 8th week since the beginning of this rally. From the point of view of the Window of Time & Price, today is just the beginning of correction, which probably will take 5 to 8 days. However, I still hold my target of $3.00. If it goes below $2.00, I will probably buy back.