Thursday, Oct. 26, 2000

CMGI chief says 'real Y2K bug' was financial

By George A. Chidi

NEW YORK -- SPEAKING largely in line with what is becoming the prevailing view among market watchers, business leaders, and, yes, venture capitalists, CMGI CEO David Wetherell said business fundamentals and a clear path to profitability are key to success in the Internet economy.

Wetherell largely absolved the investment decisions of venture capital companies of blame for the market downturn in Internet stocks in his keynote address at the Internet World trade show here. He said the downturn is "a different type of millennium bug," one caused by the government injecting additional money into the banking system out of concern for a run on banks in wake of possible Y2K computer failures.

"The real Y2K bug ended up being the government trying to prevent a run on the banks," he said.

The increased liquidity gave venture capitalists more money to fund new companies, and market valuations associated with the Internet reinforced the moves, Wetherell said.

Since the beginning of the year, many of the bellwether stocks for measuring the Internet market have fallen dramatically. Even Wetherell's own CMGI, an Internet investment and management company that either has bought or built several start-up Internet companies, lost 85 percent of its market value.

Still, the necessity and the potential of the Internet has been the rllying cry for speakers at the show. "The good news is plentiful," therell. "I'm not just here to be wearing rose-colored glasses for the industry."

Wetherell said his company's venture arm will look to fund companies with a clear path to profitability. Successful companies, he stressed, will heed changes in the way people access the Internet, as consumers begin to use devices other than personal computers to go online. For example, edge-of-the-network problems -- getting bandwidth out to mobile users -- must be addressed, he noted.

He said start-ups should address big technology problems, achieve strategic alliances quickly, and that technical smarts trump managerial ability. "We're looking for great technology first and great management second," Wetherell said. "It's easier to add the latter than the former."

George A. Chidi is a Boston-based correspondent for the IDG News Service, an InfoWorld affiliate.

http://www.infoworld.com/articles/hn/xml/00/10/26/001026hncmgi.xml

-- Martin Thompson (mthom1927@aol.com), October 27, 2000