CMGI's Mixed Earnings Bag (CMGI)

CMGI Inc. (NASDAQ:CMGI) earnings have been released.  Surprisingly enough, it seems as though that because it is not a $1 or $2 stock any longer that no one is trading the stock.

We recently noted CMGI in our "10 Stocks Under $10" weekly subscriber newsletter with ten stocks that trade under 10-bucks.   Here are today’s earnings (with percentage changes year over year where applicable):

• Net revenue of $274.7, (-3.1%);
• Operating income of $9.1 million, (+80.9%);
• Income from continuing operations of $9.2 million, (-5.1%);
• Net income of $8.6 million, (-16.6%);
• Non-GAAP operating income of $17.1 million, (+66.4%);
• Diluted EPS from continuing operations of $0.19, compared to diluted earnings per share from continuing operations of $0.20 for the same period in the prior fiscal year;
• Diluted earnings per share including discontinued operations of $0.18, compared to diluted earnings per share including discontinued operations of $0.21 for the same period in the prior fiscal year.
• CMGI also ended with $261.2 million in cash and equivalents.

Joseph C. Lawler, Chairman, President & CEO of CMGI: “Revenue was expectedly lower compared with last year due to two specific previously announced client programs that were discontinued, however we are very pleased with the growth we are seeing from other client engagements. Excluding those discontinued programs, revenue grew by approximately 15% compared to the year ago period. Gross margin performance was higher than expected, driven by work mix, continuous improvement initiatives and higher volumes for certain client programs.”

CMGI continues to expect revenue of $1.10 billion to $1.15 billion and operating income to be approximately 2.0% to 2.5% of revenue in fiscal 2008, before any restructuring.  During the first quarter ended October 31, 2007, CMGI repurchased 568,000 shares (after giving effect to the recent reverse stock split) for aggregate consideration of $8.0 million, and pursuant to which the Company has authorized the repurchase of up to $50 million of common stock over an 18-month period.

We are going to look for "new contract awards" for an area we’d like to see here.  The company needs more contracts for longer periods of time and it needs to demonstrate that customer losses are either in-sourcing or are from natural attrition that would be expected at larger companies.  Otherwise we think that traders will get tired of hearing about customer defections.

Shares were initially down by about 0.5%, but now shares are up $0.01 in after-hours.  The stock closed at $10.33 today and the implied 52-week trading range to account for the reverse split is $9.66 to $26.00.

Jon C. Ogg
December 3, 2007