CMGI Cuts Ties With Engage

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Once-high-flying Internet incubator CMGI Inc. said that it has divested its interest in Engage Inc.


According to statements by the two firms, CMGI canceled the $60 million debt Engage owed CMGI and transferred all of the stock it owned in Engage, 148.4 million shares, back to the technology firm. CMGI owned 76 percent of Engage.


In return, Engage paid CMGI $2.5 million in cash and issued CMGI a warrant to buy 9.9 percent of the shares of Engage common stock at 4.8 cents per share.


It also agreed to pay CMGI up to $6 million, in the form of a $2 million non-interest-bearing promissory note due in 2006 and future earn-out payments based on Engage's quarterly operating income starting with the fiscal quarter ending Oct. 31, 2003.


As a result of this deal, Engage no longer will be included in CMGI's financial statements.


In May, CMGI, Andover, MA, proposed buying all of the shares in Engage it did not already own, but in June rescinded the offer.


"During the month since we made the proposal, senior management of Engage and CMGI could not reach a consensus as to the execution of the business strategy for Engage," Thomas Oberdorf, chief financial officer of CMGI, said in a statement.


Engage was CMGI's attempt at an online ad network. Engage placed cookies (tracking technology) in computer users' hard drives, theoretically so it could serve ads on clients' behalves to those users anonymously anywhere on the network. The business model never panned out.


"[Anonymous] profiling did not have demand in the marketplace on a network level," Jordan Shultz, Engage vice president of sales of Internet advertising and marketing solutions, said in an interview with DM News earlier this year.


CMGI once held more than 70 companies, but after massive restructuring now holds interest in fewer than 10. Its stock once traded for more than $100 per share, but lately has hovered around 50 cents.


It most recently made national news when it renegotiated a multimillion-dollar deal with the New England Patriots to have its name removed from the football team's new stadium, now called Gillette Stadium.


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