NaviSite Gets Key Financing
NaviSite (www.navisite.com) announced it secured $20 million investment from Compaq Financial Services (CFS), a wholly owned subsidiary of Compaq and $10 million from parent company, CMGI. Additionally, CFS said it would restructure $35 million of outstanding lease obligations, essentially relieving NaviSite of those debts.
Compaq is also retiring two CMGI promissory notes, representing $220 million for AltaVista, issued by CMGI in 1999 related to the company's acquisition of AltaVista. "We are extremely pleased with this agreement. Importantly, the restructured terms allow CMGI to refocus critical financial resources on building our future business and achieving our overall target of reaching recurring operating profitability by Q4 of our current fiscal year," said David Wetherell, chairman and chief executive officer, CMGI.
Tricia Gilligan, acting CEO of NaviSite, said that the influx of cash makes NaviSite "financially viable, with enough cash to go forward." Earlier this year NaviSite hired investment banking firm Goldman Sachs to look for deals, including mergers or acquisitions, because the company was low on operating cash. Gilligan said that this deal solves the cash crunch problem. "We're on our way to cash flow positive without a new cash infusion," she said. Still, Gilligan stopped short of saying when the company would be profitable.
Gilligan said that NaviSite's core businesses, managed hosting and streaming, would be on a "rapid growth curve." "We think [NaviSite's] streaming asset are great assets," she said, saying that the managed services side of the business will be looking to sell more streaming services in the future.
Speaking about possible suitors, Gilligan said there has been a "high degree of interest" in NaviSite. Interestingly, Compaq is now a majority stakeholder in the company, and even has the option to acquire the entire company in the future.