CMGI crashed hard due in part to a double whammy. Most Internet companies were pummeled simply for their own operating failures. CMGI experienced plenty of that, as its operating companies, including the AltaVista Inc. search site, tanked along with other Web outfits. Unfortunately, when the marketplace figured out that the New Economy is subject to Old Economy valuation methods, each of their portfolio companies came crashing down like Humpty Dumpty. But on Wall Street, getting big quickly via acquisitions is out for Internet companies.
Profitability is in.
For CMGI, adjusting to the new market sentiment has meant a radical shift in strategy and a frenzied round of cost-cutting. A year ago, in CMGI's first-quarter earnings report for fiscal 2000, the word profitability didn't receive a mention. This year, the first-quarter report used the word five times. Instead of making acquisitions, CMGI is selling, merging and shutting down subsidiaries as quickly as possible. Since September, the company has reduced its majority-owned companies to 12 from 17, with plans to cut the number to as low as five.