TECHNOLOGY TRADER: CMGI, a Dot-Com Flameout, Reignites by Tiernan Ray
Summary: Despite a 66% jump in its share price this year, CMGI Inc. (CMGI) may still be a bargain. The transformed dot-com blowout (shares went from $327 to $0.28) now makes money from receiving large shipments of electronics products and bundling them with accessories like power supplies for U.S. customers. The more products are built in Asia, the more lucrative its business model becomes. Gross profits are up from 8% to a recent 12.5%, and CEO Joe Lawler tells Barron's he can achieve 12-14% consistently by eliminating waste in variable costs. Recent losses of customers Hewlett-Packard Co. (HPQ) and Eastman Kodak Co. (EK) cost the company $170 million in sales, but Lawler says he has other clients lined up for higher-value electronics (an unnamed source says they could include EMC Corp. (EMC)). Net of HP and Kodak, sales are up 8% (vs. the -1% seen on its income statement). And with $1 billion in sales, $275 million in cash, and $2 billion in tax-loss carry-forwards, CMGI could be an attractive buyout target for shippers like FedEx (FDX) or United Parcel Service (UPS).