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CMGI Reportedly Planning to Shut Down or Sell ICast, Other Web Properties

Internet: Analysts say the move would not be surprising, given the troubles that have plagued the entertainment sector.

November 08, 2000|From Reuters

CMGI Inc., which owns or has stakes in more than 70 online companies, may announce plans soon to exit some struggling ventures, including its majority-owned entertainment Webcasting company ICast, industry sources said Tuesday.

Shares of Andover, Mass.-based CMGI rose $2.81, or 10.5%, to close at $23.81 in heavy Nasdaq trading. CMGI officials were not available for comment, and a spokesman for ICast, which employs about 200 people, declined to comment.

But sources close to the company said CMGI was planning to shut down or possibly announce plans to sell ICast and other Web content properties as early as Friday.

"I've heard that ICast was going to be sold by CMGI or closed," one industry source said, adding that people within the company had recently indicated it was "de-emphasizing its East Coast operations" in Boston and New York and was mulling a "change in management ownership."

CMGI Chief Executive David Wetherell has said he would move to consolidate operations. CMGI-owned AltaVista Internet search service recently laid off a quarter of its staff and refocused its business model in a bid to become profitable.

"Wetherell is taking steps to prove that he can make money, and they've been closing down various search and portal sites," said Babson-United analyst Richard Babson.

"As management demonstrates the ability to cut operating losses and move some of the operating divisions toward profitability over the next couple of quarters, we should see an upside to the price of the company's stock," Babson said.

Industry sources said talk of a strategic change at ICast has been circulating for weeks. Analysts said it was not surprising, given the troubles that have plagued the online entertainment sector as a whole.

"It [ICast] just plays into the general entertainment 'dot-com' story. There's been a lot of venture capital, and time and effort invested by incubators toward making entertainment Web sites a reality, but it's proven difficult to find the right formula," said Eric Scheirer, analyst with Forrester Research.

Experts said many entertainment Webcasters have stumbled as they have tried to repackage traditional content for the Internet and have failed to find lucrative business models.

Companies such as Pop.com and Shockwave.com, which have touted big celebrity ties, have laid off staff, while Digital Entertainment Network filed for bankruptcy and is being investigated for possible fraudulent asset sales prior to its filing.

Scour, an online multimedia company backed by Hollywood power broker Michael Ovitz, also filed for bankruptcy after being sued for copyright infringement by the film and music industries. It announced last week that it will sell its assets to online music company Listen.com.

Lawrence Levy, chief executive of Shockwave.com, which has created some online programs with such stars as Tim Burton and Jim Belushi, has said it is a challenging time for the industry.

"The market's going through a very healthy shakeout, and we'll be left with the companies that drive this medium and will become the major brands two to three years from now," he said in September.

"CMGI is certainly pulling back, and it makes sense they would do so with ICast with all the trouble there's been in the streaming video space," said Malcolm Maclachlan, an analyst with Internet Data Corp., an Internet research firm.

Scheirer described ICast as a difficult site: "They've never succeeded in developing an entertainment brand. With so much random stuff and without a big marketing effort, it's hard to brand yourself to consumers as a destination site."

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