Feeds

And with one bound Engage is debt free

CMGI cuts cord

  • alert
  • submit to reddit

Security for virtualized datacentres

Engage, the ad-serving firm, can at last present a credible alternative to Doubleclick, after breaking free from the $40m debt owed to ailing parent CMGI.

CMGI is to return all the equity it holds in Engage to the company and it is cancelling its debt. In return, Engage is paying $2.5m in cash upfront, and $6m in earn-out payments beginning in 2004 and a secured, but interest-free promissory note, due for payment in September 2006. Bargain.

CMGI also has an option to purchase up to 9.9% of the issued and outstanding shares of Engage Common Stock, at an exercise price of 48 cents per share. Engage shares closed on Monday at 48 cents.

As recently as May this year, CMGI wanted to take full ownership of Engage, making an offer of 0.2286 CMGI shares for every outstanding Engage share - c.25 per cent of the business. But the deal collapsed in June, following arguments over strategy between the two camps.

In the past, there have been question marks over the financial viability of Engage. In recent quarter, the company has written off hundreds of millions of dollars in asset impairment, contributing to massive losses. This has hobbled its ability to compete head-to-head with market leader Doubleclick.

With the CMGI debt off its back, Engage can focus entirely on winning new business. And there's lots to be won, from the Doubleclick's huge soft underbelly. (Where do we sign up?)

Once upon a time, CMGI was a mighty dotcom VC-cum- holding company, valued at tens of billions of dollars. At its peak, CMGI shares were $151 each. Now they are around 50 cents. Some of the investments, such as Engage were good business propositions, but worth nothing like the money pumped into them by CMGI, which has lost billions of dollars in recent years.

CMGI is now recasting itself as a player in the logistics software business. As such, Engage is a handicap, making key indices on the balance sheet look worse - return on capital, profitability etc. By cutting the ties with Engage, CMGI removes the company's results from the accounts and can cast itself as a pure-play supply chain business. Also, it can participate in some upside in Engage through the share option. ®

Related link

Engage balance sheet, filed with the SEC on June 14, 2002

Security and trust: The backbone of doing business over the internet

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Why Oracle CEO Larry Ellison had to go ... Except he hasn't
Silicon Valley's veteran seadog in piratical Putin impression
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
Bono: Apple will sort out monetising music where the labels failed
Remastered so hard it would be difficult or impossible to master it again
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.