Robbie Stephens Conference: CMGI Rocks 'Em at Robbie

CMGI wows the crowd with its impressive returns, but avoids discussing Lycos. Also, is Ciena ready to acquire again?
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Microsoft (MSFT) - Get Report canceled Wednesday afternoon and money managers went looking for "diamonds in the gravel," as one put it. Enter CMGI (CMGI) CEO David Wetherell, whose pitch must have sounded like a call to a gold rush to the SRO crowd.

CMGI's celebrated stable of emerging Internet companies was trotted out once again for the admiring crowd. One subsidiary,

Planet Direct

, sent its new CEO Jeffrey Cunningham to make a cameo appearance. At Wetherell's behest the casually dressed former

Forbes

group publisher stood, smiled and waved.

But the real info the crowd craved -- comments on CMGI's position regarding the

USA Networks

(USAI) - Get Report

-

Lycos

(LCOS)

deal announced earlier this month -- wasn't addressed directly by Wetherell until the after the company's canned presentation ended. Though he did allow that CMGI lost some value in the proposed deal -- "temporarily," he said, with a wave of the finger.

Following the presentation, Wetherell told

TSC

that CMGI, which holds a 20% stake in Lycos, was generally supportive of the deal but "not at this price." He also said that USA has to "bring more to the table." Lycos shares fell 35% to 94 1/4 the day the deal was announced. Wednesday the stock closed at 90 1/2. Wetherell wouldn't name what price CMGI would be more supportive at or what he wanted USA to add to sweeten the deal.

The CEO returned to the topic at CMGI's breakout session where the first question lobbed was, "What's up with USA-Lycos?" according to one institutional money manager present. Wetherell reportedly demurred with "I've already said enough," before returning again to the subject to say he supports "the strategy of the deal," and voted in favor of it on the board, the money manager said.

Wetherell then said it remains to be seen if the shareholder base approves, according to the manager who is an investor in both CMGI and Lycos. The manager said Wetherell's comments in the breakout Wednesday left him with the impression that the deal will still happen, but the CMGI CEO is leading the charge for a better terms for Lycos shareholders.

During the presentation, Wetherell focused on the company's brightest prospects. Most compelling of the two dozen companies CMGI supports or owns is a proposed

television network, which will be headed by Neil Braun, former head of NBC-TV.

Magnitude Network

, an online radio company modeled after

broadcast.com

, will be folded into this television broadcast company.

Some of the companies expected to go for a public offering in the next 24 months, says Wetherell, include

Silknet

,

Critical Path

,

Chemdex

,

Raging Bull

, and

Ancestry.com

, to name a few. CMGI owns a 50% stake in Raging Bull and a 39% stake in Ancestry.com, 7% of Critical Path, 16% of Chemdex, and 34% of Silknet.

The packed house let out an audible gasp when shown the company's return on a total of $39 million in what is essentially venture capital investments: $1.9 billion. "It's ... phenomenal," said one money manager in attendance. "I'm finally thinking that after watching this stock for 18 months from the sidelines that it's time to get in -- this company's got legs." CMGI closed down 6 5/16 at 111 3/16 after rising as high as 119 1/2.

Look for more news from Lycos when it presents at Robbie Stephens Thursday afternoon.

-- Alison Moore, Eric Moskowitz and Suzanne Galante in San Francisco and George Mannes in New York

Is Ciena Acquisitive Again?

Can

Ciena

(CIEN) - Get Report

really be on the prowl again? Even after Ciena's M&A activity led to a

horror movie of a summer last year, there was talk of more M&As for Ciena at its packed presentation Wednesday at the Robbie Stephens conference. Ciena's stock rose 11% to 27 1/4 amid the buzz.

"Are they being built up to be sold or can they really get back to where they were before the

Tellabs

(TLAB)

mess happened?" asks Nicholas Moore, a money manager at

Jurika and Voyles

. "Can they really take $34 a share from another company after they were worth $90 a share to Tellabs last year? I don't think so." Moore has no position in Ciena stock.

Ciena CEO Patrick Nettles talked about products during his 15-minute speech, especially the MultiWave 4000. "This product will make up a significant part of our business by the end of our fiscal year (in October)." Nettles also highlighted the company's first-class reputation, as if it were looking for partners to dance with.

But it's the financial numbers that Nettles didn't discuss that concern managers such as Moore. "The big issue is gross margins, which were in free-fall mode over the last two quarters," he says. Ciena's margins were hurt last year by pricing cuts from

Lucent

(LU)

and

Nortel

(NT)

in its wavelength division multiplexing products that boost bandwidth in fiber-optic networks. But now business seems to be improving.

Gross margins increased to 34.5% in its first fiscal quarter ending in January 1999 from 31.2% in its October 1998 quarter. This kind of news has some money managers optimistic about Ciena's future. Esmond Goei of Mountain View-based

ETG Associates

says he came away convinced that Ciena "has its act together again."

BancBoston Robertson Stephens

analyst Paul Silverstein also did his part to help make Ciena more attractive by upgrading the stock to a buy from long-term attractive before the presentation, writing that in the past three weeks "we have seen signs of improvement on the gross margins."

At the end of the presentation, however, it was clear that fund managers were once again interested in Ciena. The legendary tech fund manager, Jon Gruber of

Gruber McBain

, was hanging on Nettles' every word as the two headed to the breakout session.

-- Eric Moskowitz