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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ----------------

                               FORM 10-K/A


                             AMENDMENT NO. 1


      FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934

                      For Fiscal Year Ended July 31, 2001

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
   EXCHANGE ACT OF 1934

  For the Transition Period From               to

                           Commission File 000-23262

                               ----------------

                                  CMGI, Inc.
            (Exact name of registrant as specified in its charter)

               Delaware                              04-2921333
           (State or other jurisdiction           (I.R.S. Employer
     of incorporation or organization)           Identification No.)

                            100 Brickstone Square       01810
                           Andover, Massachusetts    (Zip Code)
                       (Address of principal executive
                                  offices)

                                (978) 684-3600
              Registrant's telephone number, including area code

                               ----------------

          Securities registered pursuant to Section 12(b) of the Act:

                                     None

          Securities registered pursuant to Section 12(g) of the Act:

                               (Title of Class)
                         Common Stock, $0.01 par value

                               ----------------

  Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

  The approximate aggregate market value of Common Stock held by non-
affiliates of the Registrant was $398,438,310 as of October 19, 2001.

  On October 19, 2001, the Registrant had outstanding 352,490,772 shares of
Common Stock, $0.01 par value.


                      DOCUMENTS INCORPORATED BY REFERENCE

  Portions of the definitive proxy statement (the "Definitive Proxy
Statement") filed with the Securities and Exchange Commission relative to the
Company's 2001 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Report.


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                             EXPLANATORY NOTE


  This Amendment No. 1 to Annual Report on Form 10-K/A (i) amends and restates
Items 6, 7 and 8 of Part II and Item 14 of Part IV of the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31, 2001, as filed by the
Registrant on October 29, 2001, to correct the results of inadvertent errors
made in the calculation of certain non-cash charges included therein, and (ii)
corrects the number of shares of the Registrant's Common Stock outstanding on
October 19, 2001.


  In the process of finalizing the Registrant's financial statements for the
quarter ended October 31, 2001, the Registrant discovered that inadvertent
errors had been made in the calculation of certain amounts included in the
Registrant's audited financial statements for the year ended July 31, 2001
included in the Form 10-K. These errors related to the recording of impairment
and amortization charges in consolidation of intangible assets associated
primarily with AltaVista and Engage, subsidiaries of the Registrant. An
inadvertent error was also made in the recording of certain amounts related to
the other-than-temporary impairment of the Registrant's marketable security
investment in Primedia, Inc. Accordingly, the Registrant has restated its
financial statements to reflect the correction of these inadvertent errors and
has taken remedial action over the consolidation process that the Registrant
believes will prevent or detect future such errors. Conforming changes
reflecting these corrections have been made in the Registrant's Selected
Consolidated Financial Data, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Consolidated Financial Statements and
Notes thereto.


  The effect of this restatement on previously reported consolidated financial
statements as of and for the year ended July 31, 2001 is as follows (in
thousands, except per share amounts):





                                                        Year Ended July 31,
Consolidated Statements of Operations:                         2001
--------------------------------------                ------------------------
                                                      As Reported   Restated
                                                      -----------  -----------
                                                             
Amortization of intangible assets and stock-based
 compensation........................................ $ 1,490,714  $ 1,558,164
Impairment of long-lived assets......................   3,334,133    3,363,317
Operating loss.......................................  (5,771,327)  (5,867,961)
Other gains (losses), net............................    (357,547)    (413,097)
Minority interest, net...............................     507,652      526,623
Loss before income taxes.............................  (5,539,111)  (5,672,324)
Income tax expense (benefit).........................    (161,531)    (184,404)
Net loss.............................................  (5,377,580)  (5,487,920)
Net loss available to common stockholders............  (5,385,079)  (5,495,419)
Basic and diluted loss per share.....................      (16.34)      (16.67)

Consolidated Balance Sheets:                               July 31, 2001
----------------------------                          ------------------------
                                                      As Reported   Restated
                                                      -----------  -----------
                                                             
Goodwill and other intangible assets, net of accumu-
 lated amortization..................................  $  561,501   $  464,867
Total assets.........................................   2,185,565    2,088,931
Minority interest....................................     205,411      186,440
Accumulated deficit..................................  (6,242,893)  (6,353,233)
Accumulated other comprehensive income (loss)........     (14,995)      17,682
Total stockholders' equity...........................     883,420      805,757







ITEM 6.--SELECTED CONSOLIDATED FINANCIAL DATA

  The following table sets forth selected consolidated financial information
of the Company for the five years ended July 31, 2001. The following selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes to those statements
included elsewhere or incorporated by reference in this report. The following
consolidated financial data includes the results of operations (from dates of
acquisition) of the Company's fiscal 1997 acquisition of Pacific Direct
Marketing Corporation, the fiscal 1998 acquisitions of Accipiter, Inc.,
InSolutions, Inc., Servercast Communications, LLC and On-Demand Solutions,
Inc., the fiscal 1999 acquisitions of Magnitude Network, Inc., 2CAN Media,
Inc., Internet Profiles Corporation, Activerse, Inc., Nascent Technologies,
Inc., Netwright, LLC and Digiband, Inc., the fiscal 2000 acquisitions of
AltaVista Company, AdForce, Inc., Flycast Communications Corporation,
yesmail.com, inc., Tallan, Inc., uBid, Inc. and eighteen other companies and
the fiscal year 2001 acquisitions of Space Media Holding Limited and
MediaBridge Technologies, Inc. See Note 8 to the Company's consolidated
financial statements for further information concerning these acquisitions.
The historical results presented herein are not necessarily indicative of
future results.




                                          Years ended July 31,
                          --------------------------------------------------------
                             2001         2000         1999       1998      1997
                          -----------  -----------  ----------  --------  --------
                           (Restated)   (in thousands, except per share data)
                                                           
Consolidated Statement
 of Operations Data:
Net revenue.............  $ 1,237,702  $   890,421  $  186,389  $ 92,197  $ 67,306
Cost of revenue.........    1,131,778      735,164     179,553    83,021    42,116
Research and development
 expenses...............      158,960      153,930      22,253    19,108    17,767
In-process research and
 development expenses...        1,462       65,683       6,061    10,325     1,312
Selling, general and ad-
 ministrative expenses..      674,763      673,801      89,054    46,909    45,777
Amortization of intangi-
 ble assets and stock-
 based compensation.....    1,558,164    1,402,675      16,127     3,093     1,254
Impairment of long
 lived-assets...........    3,363,317       34,205         --        --        --
Restructuring...........      217,219       14,770         --        --        --
                          -----------  -----------  ----------  --------  --------
Operating loss..........   (5,867,961)  (2,189,807)   (126,659)  (70,259)  (40,920)
Interest income (ex-
 pense), net............        5,978      (15,096)        269      (870)    1,749
Gains on issuance of
 stock by subsidiaries
 and affiliates.........      121,794       80,387     130,729    46,285       --
Other gains (losses),
 net....................     (413,097)     525,265     758,312    96,562    27,140
Other income (expense),
 net....................      480,962      113,385     (13,406)  (12,899)     (769)
Income tax benefit (ex-
 pense).................      184,404      121,173    (325,402)  (31,555)   (2,034)
                          -----------  -----------  ----------  --------  --------
Income (loss) from con-
 tinuing operations.....   (5,487,920)  (1,364,693)    423,843    27,264   (14,834)
Discontinued operations,
 net of income taxes....          --           --       52,397     4,640    (7,193)
                          -----------  -----------  ----------  --------  --------
Net income (loss).......   (5,487,920)  (1,364,693)    476,240    31,904   (22,027)
Preferred stock accre-
 tion and amortization
 of discount............       (7,499)     (11,223)     (1,662)      --        --
                          -----------  -----------  ----------  --------  --------
Net income (loss) avail-
 able to common stock-
 holders................  $(5,495,419) $(1,375,916) $  474,578  $ 31,904  $(22,027)
                          ===========  ===========  ==========  ========  ========
Diluted earnings (loss)
 per share:
Earnings (loss) from
 continuing operations..  $    (16.67) $     (5.26) $     2.05  $   0.15  $  (0.10)
Discontinued opera-
 tions..................          --           --         0.25      0.03     (0.05)
                          -----------  -----------  ----------  --------  --------
Net earnings (loss).....  $    (16.67) $     (5.26) $     2.30  $   0.18  $  (0.15)
                          ===========  ===========  ==========  ========  ========
Shares used in computing
 diluted net earnings
 (loss) per share.......      329,623      261,555     206,832   180,120   150,864
                          ===========  ===========  ==========  ========  ========
Consolidated Balance
 Sheet Data:
Working capital.........  $   581,316  $ 1,110,105  $1,381,005  $ 12,784  $ 38,554
Total assets............    2,088,931    8,557,107   2,404,594   259,818   146,248
Long-term obligations...      240,911      278,968      34,867     5,801    16,754
Redeemable preferred
 stock..................      390,640      383,140     411,283       --        --
Stockholders' equity....      805,757    5,785,802   1,062,461   133,136    29,448



                                       1


ITEM 7.--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

  The matters discussed in this report contain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended, that
involve risks and uncertainties. All statements other than statements of
historical information provided herein may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes",
"anticipates", "plans", "expects" and similar expressions are intended to
identify forward-looking statements. Factors that could cause actual results
to differ materially from those reflected in the forward-looking statements
include, but are not limited to, those discussed below in "Factors That May
Affect Future Results," and elsewhere in this report, and the risks discussed
in the Company's other filings with the SEC. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis, judgment, belief or expectation only as of the date
hereof. The Company undertakes no obligation to publicly revise these forward-
looking statements to reflect events or circumstances that arise after the
date hereof.

Basis of Presentation

  Certain amounts for prior periods in the accompanying consolidated financial
statements, and in the discussion below, have been reclassified to conform
with current period presentations.

Restatement




  In the process of finalizing the Company's financial statements for the
quarter ended October 31, 2001, the Company discovered that inadvertent errors
had been made in the calculation of certain amounts included in the Company's
audited financial statements for the year ended July 31, 2001 included in the
Form 10-K. These errors related to the recording of impairment and
amortization charges in consolidation of intangible assets associated
primarily with AltaVista and Engage, subsidiaries of the Company. An
inadvertent error was also made in the recording of certain amounts related to
the other-than-temporary impairment of the Company's marketable security
investment in Primedia, Inc. Accordingly, the Company has restated its
financial statements to reflect the correction of these inadvertent errors and
has taken remedial action over the consolidation process that the Company
believes will prevent or detect future such errors. Conforming changes
reflecting these corrections have been made in the Company's Selected
Consolidated Financial Data, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Consolidated Financial Statements and
Notes thereto.


  The effects of this restatement on previously reported consolidated
financial statements as of and for the year ended July 31, 2001 include the
following changes (in thousands, except per share amounts):


Consolidated Statements of Operations:






                                                            Year Ended
                                                           July 31, 2001
                                                      ------------------------
                                                      As Reported   Restated
                                                      -----------  -----------
                                                             
Amortization of intangible assets and stock-based
 compensation........................................ $ 1,490,714  $ 1,558,164
Impairment of long-lived assets......................   3,334,133    3,363,317
Operating loss.......................................  (5,771,327)  (5,867,961)
Other gains (losses), net............................    (357,547)    (413,097)
Minority interest, net...............................     507,652      526,623
Loss before income taxes.............................  (5,539,111)  (5,672,324)
Income tax expense (benefit).........................    (161,531)    (184,404)
Net loss.............................................  (5,377,580)  (5,487,920)
Net loss available to common stockholders............  (5,385,079)  (5,495,419)
Basic and diluted loss per share.....................      (16.34)      (16.67)



                                       2



Consolidated Balance Sheets:





                                                            July 31, 2001
                                                        ----------------------
                                                            As
                                                         Reported    Restated
                                                        ----------  ----------
                                                              
Goodwill and other intangible assets, net of accumu-
 lated amortization.................................... $  561,501  $  464,867
Total assets...........................................  2,185,565   2,088,931
Minority interest......................................    205,411     186,440
Accumulated deficit.................................... (6,242,893) (6,353,233)
Accumulated other comprehensive income (loss)..........    (14,995)     17,682
Total stockholders' equity.............................    883,420     805,757



Overview

  CMGI, Inc. (together with its consolidated subsidiaries, "CMGI" or the
"Company") is a diversified Internet operating and development company. The
Company's subsidiaries have been classified in the following five operating
segments: (i) Interactive Marketing, (ii) eBusiness and Fulfillment, (iii)
Search and Portals, (iv) Infrastructure and Enabling Technologies and (v)
Internet Professional Services. CMGI's affiliated venture capital arm is
comprised of several venture capital funds that focus on investing in
companies involved in various aspects of the Internet and Internet technology.
CMGI's business strategy over the years has led to the development,
acquisition and operation of majority-owned subsidiaries focused on the
Internet and Internet technologies, as well as the strategic investment in
other Internet companies that have demonstrated synergies with CMGI's core
businesses. The Company's strategy also envisions and promotes opportunities
for synergistic business relationships among its subsidiaries, investments and
affiliates.

  CMGI's Interactive Marketing companies provide services and solutions for
marketers and advertisers to enhance the effectiveness and efficiency of their
online programs. Engage offers software products and services that enable
marketers and advertisers to streamline and improve the management and
delivery of marketing programs and materials. Yesmail provides comprehensive
permission-based email marketing technologies and services.

  CMGI's eBusiness and Fulfillment companies work across the entire eBusiness
value chain to sell and deliver goods from the manufacturer to the customer.
uBid offers an auction platform and SalesLink provides supply chain and
fulfillment services. Auction is ideally suited to the medium of the Internet,
allowing buyers and sellers to transact independently across borders and
across time zones. Taking a business digital entails far more than merely
putting customer interaction functions online. It also requires readjustment
of internal business processes, coordination of order sources and
reorganization of supply chain, inventory and fulfillment processes.

  CMGI's Search and Portals companies provide products and services which
connect Internet, extranet and intranet users to information. AltaVista is a
leading global search provider for Internet users and businesses that delivers
access to the most relevant information. MyWay is a provider of services and
solutions designed to allow businesses to customize online portals for their
employees, vendors and customers.

  CMGI's Infrastructure and Enabling Technologies companies include NaviSite,
NaviPath, Inc. (NaviPath) through the end of fiscal year 2001, Equilibrium and
CMGion. These companies provide products and services essential to business
operations on the Internet, including outsourced managed applications,
technology platforms for automating digital imagery and applications designed
to improve the performance of systems and networks.

  Tallan, CMGI's Internet Professional Services company, offers strategy
consulting, creative services and infrastructure development to Global 2000
companies seeking to initiate, enhance or redirect their presence on the
Internet.

  In addition, the Company maintains interests in several venture funds:
CMG@Ventures I, CMG@Ventures II, CMG@Ventures III, CMG@Ventures Expansion and
CMGI@Ventures IV. CMGI's venture funds invest in


                                       3


emerging Internet service and technology companies, introducing innovative and
promising technology companies into the CMGI network to complement and create
competitive advantage throughout the extended family of companies. The Company
anticipates and promotes synergies between these strategic positions and
CMGI's core businesses, including speeding technological innovation and access
to markets.

Results of Operations

Fiscal 2001 compared to Fiscal 2000

NET REVENUE:



                                     % of 2001          % of 2000
                                     Total Net          Total Net
                             2001     Revenue    2000    Revenue  2001 vs. 2000 % Change
                          ---------- --------- -------- --------- ------------- --------
                                                  (in thousands)
                                                              
Interactive Marketing...  $  133,449     11%   $187,348     21%     $(53,899)     (29)%
eBusiness and Fulfill-
 ment...................     691,414     56%    345,177     39%      346,237      100%
Search and Portals......     182,280     15%    236,778     26%      (54,498)     (23)%
Infrastructure and
 Enabling Technologies..     136,095     11%     78,620      9%       57,475       73%
Internet Professional
 Services...............      94,464      7%     42,498      5%       51,966      122%
                          ----------           --------             --------
Total...................  $1,237,702    100%   $890,421    100%     $347,281       39%
                          ==========    ===    ========    ===      ========      ===


  The increase in 2001 net revenue compared to 2000 was largely a result of
the full year impact of the acquisitions of uBid in April 2000 and Tallan in
March 2000 and increased net revenue growth at NaviSite and NaviPath during
fiscal year 2001, partially offset by the sale or closing of operations of
several companies during fiscal year 2001. The decrease in net revenue within
the Interactive Marketing segment was primarily the result of decreased net
revenue at Engage resulting from a decline in the on-line advertising market,
partially offset by Engage's acquisition of MediaBridge Technologies, Inc.
(MediaBridge) during fiscal year 2001 and the full year impact of CMGI's
acquisition of Yesmail in March 2000. Subsequent to July 31, 2001, Engage
announced it had ceased its media business, which comprised approximately 50%
and 69% of the Interactive Marketing segment net revenue for fiscal year 2001
and 2000, respectively, and would be focusing on interactive software and
services. The increase in net revenue within the eBusiness and Fulfillment
segment was primarily the result of the full year impact of the fiscal year
2000 acquisition of uBid, partially offset by the sale of a majority interest
in Signatures SNI, Inc. (Signatures) in February 2001 and decreased net
revenue at SalesLink as a result of the decline in volume within SalesLink's
e-commerce and fulfillment and literature distribution lines of business. The
decrease in net revenue at SalesLink was partially offset by the growth of net
revenue within its supply chain management line of business. During the fourth
quarter of fiscal year 2001, the Company adopted Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" and Emerging Issues Task
Force No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an
Agent", and accordingly adjusted net revenue at uBid by $27.6 million and $7.6
million in fiscal year 2001 and 2000, respectively. These adjustments reduce
both net revenue and cost of revenue and have no impact on operating loss. The
decrease in net revenue within the Search and Portals segment was primarily
the result of a decrease in net revenue at AltaVista due to reduced net
revenue from certain strategic deals renegotiated during fiscal year 2001, the
softness in the on-line advertising market and certain changes in AltaVista's
business strategy from a focus on on-line advertising to a focus on search
software. The increase in net revenue within the Infrastructure and Enabling
Technologies segment was primarily the result of increased net revenue from
NaviSite and NaviPath and the full year impact of the acquisition of Activate,
Inc. (Activate) in November 1999, partially offset by a decrease in net
revenue at CMGion's majority-owned subsidiary, AdForce, Inc. (AdForce)
primarily due to a decline in its on-line advertising market and the effect of
closing AdForce's operations in June 2001. The increase in net revenue for
NaviSite during fiscal year 2001 was primarily due to the growth of its
customer base facilitated by the build-out of its data center facilities. The
increase in net revenue for NaviPath during fiscal year 2001 primarily related
to

                                       4


the growth in the number of users and hours due to the expansion of its
network coverage across the United States and Canada. Subsequent to July 31,
2001, the Company ceased funding the operations of NaviPath, which comprised
approximately 24% and 21% of the net revenue in the Infrastructure and
Enabling Technologies segment in fiscal year 2001 and 2000, respectively. The
increase in net revenue within the Internet Professional Services segment was
primarily the result of the full year impact of the acquisition of Tallan in
April 2000. The Company expects net revenue to decrease in fiscal year 2002
primarily due to the full year impact of management's restructuring
initiatives and the full year impact of the sale and closing of operations of
several companies and the decline in the Internet professional services
market.

COST OF REVENUE:



                                      % of 2001            % of 2000
                                       Segment              Segment
                             2001    Net Revenue   2000   Net Revenue 2001 vs. 2000 % Change
                          ---------- ----------- -------- ----------- ------------- --------
                                                    (in thousands)
                                                                  
Interactive Marketing...  $   97,822      73%    $130,198      69%      $(32,376)     (25)%
eBusiness and Fulfill-
 ment...................     616,861      89%     293,942      85%       322,919      110%
Search and Portals......      90,335      50%     126,008      53%       (35,673)     (28)%
Infrastructure and
 Enabling Technologies..     257,366     189%     152,077     193%       105,289       69%
Internet Professional
 Services...............      69,394      73%      32,939      78%        36,455      111%
                          ----------             --------               --------
Total...................  $1,131,778      91%    $735,164      82%      $396,614       54%
                          ==========     ===     ========     ===       ========      ===


  Cost of revenue consisted primarily of expenses related to the cost of
products purchased for sale or distribution. Additionally, cost of revenue
included expenses related to the content, connectivity and production
associated with delivering the Company's products and services. The increase
in 2001 cost of revenue compared to 2000 was largely attributable to the full
year impact of the fiscal year 2000 acquisitions of uBid and Tallan and the
costs associated with the expansion of network infrastructure at NaviSite and
NaviPath. These increases were partially offset by decreases related to the
implementation of the Company's restructuring initiatives, which included the
sale or closing of operations of several companies during fiscal year 2001 and
actions taken at several of the remaining subsidiaries to increase operational
efficiencies, improve margins and further reduce expenses. The Company's gross
margin percentage decreased to approximately 9% for fiscal year 2001 from 18%
for the prior fiscal year primarily as a result of the full year impact of
companies acquired in fiscal year 2000, the decline in net revenue from on-
line advertising and the increasing costs associated with the expansion of
network infrastructure. The decrease in cost of revenue within the Interactive
Marketing segment was primarily due to a reduction in headcount and reduced
royalty expenses paid to Web publishers at Engage as a result of the
restructuring initiatives implemented during fiscal year 2001, partially
offset by the impact of the fiscal year 2001 acquisition of MediaBridge. Gross
margins for the Interactive Marketing segments decreased to approximately 27%
for fiscal year 2001 from approximately 31% for the prior fiscal year
primarily due to a significant decline in net revenue from the on-line
advertising business while content delivery costs remained fixed, partially
offset by the positive gross margin contributions of the MediaBridge business.
The increase in cost of revenue within the eBusiness and Fulfillment segment
was primarily due to the full year impact of the fiscal year 2000 acquisition
of uBid, partially offset by the sale of a majority interest in Signatures
during fiscal year 2001. Gross margins in the eBusiness and Fulfillment
segment decreased to approximately 11% for fiscal year 2001 from approximately
15% for fiscal year 2000 primarily due to the full year impact of the
acquisition of uBid and a change in the mix of business at SalesLink from
literature distribution services and e-commerce fulfillment to supply chain
management. The decrease in cost of revenue within the Search and Portals
segment was primarily due to the change in the business strategies at
AltaVista and MyWay and the closing of operations at iCAST Corporation (iCAST)
in January 2001. AltaVista made certain changes in its business strategy in an
effort to move from a focus on on-line advertising to a focus on search
software. Gross margins increased within the Search and Portal segment to
approximately 50% for fiscal year 2001 from approximately 47% for fiscal year
2000 primarily due to the shift in focus from the lower margin on-line
advertising model to a higher margin

                                       5


search software business model. The increase in cost of revenue within the
Infrastructure and Enabling Technologies segment was primarily due to
increased costs to support the growth of the customer base and network usage
at NaviSite and NaviPath during fiscal year 2001 and the full year impact of
the fiscal year 2000 acquisitions of Activate, AdForce (January 2000) and
Equilibrium (January 2000). Gross margins within the Infrastructure and
Enabling Technologies segment have increased to (89%) in fiscal year 2001 from
(93%) in fiscal year 2000. The negative gross margin within the Infrastructure
and Enabling Technologies segment was primarily due to increased costs to
build and develop network capacity and price declines as a result of the
excess availability of network capacity created by the decline of the "dot
com" sector. The increase in cost of revenue within the Internet Professional
Services segment was primarily related to the full year impact of the
acquisition of Tallan. Gross margins within the Internet Professional Services
segment have increased to approximately 27% in fiscal year 2001 from
approximately 22% in fiscal year 2000 primarily due to a change in focus from
a mix of product offerings and services to solely services.

RESEARCH AND DEVELOPMENT EXPENSES:



                                   % of 2001            % of 2000
                                    Segment              Segment
                           2001   Net Revenue   2000   Net Revenue 2001 vs. 2000 % Change
                         -------- ----------- -------- ----------- ------------- --------
                                                  (in thousands)
                                                               
Interactive Marketing... $ 45,560      34%    $ 31,807      17%      $ 13,753       43%
eBusiness and Fulfill-
 ment...................      703       1%       2,571     --          (1,868)     (73)%
Search and Portals......   68,950      38%      89,661      38%       (20,711)     (23)%
Infrastructure and En-
 abling
 Technologies...........   43,747      32%      26,906      34%        16,841       63%
Internet Professional
 Services...............      --      N/A        2,985       7%        (2,985)     N/A
                         --------             --------               --------
Total................... $158,960      13%    $153,930      17%      $  5,030        3%
                         ========     ===     ========     ===       ========      ===


  Research and development expenses consisted primarily of personnel and
related costs to design, develop, enhance, test and deploy the Company's
products and services either prior to the development effort reaching
technological feasibility or once the product had reached the maintenance
phase of its life cycle. The increase in 2001 research and development
expenses compared to 2000 within the Interactive Marketing segment was
primarily the result of the full year impact of the acquisitions of
AdKnowledge, Inc. (AdKnowledge), Flycast Communications Corporation (Flycast)
and Yesmail during fiscal year 2000 and increased development efforts at
Engage related to the further development of its software business. The
decrease within the Search and Portals segment was primarily the result of the
decrease in research and development expense resulting from the closing of
operations at iCAST in January 2001 and the closing of certain operations at
MyWay, partially offset by increased efforts at AltaVista related to further
development of its search software. The increase in the Infrastructure and
Enabling Technologies segment was primarily the result of the full year impact
of the acquisitions of Activate and Equilibrium during fiscal year 2000 and
increased development efforts at NaviSite and CMGion, partially offset by a
decrease in development efforts at NaviPath. The decrease within the Internet
Professional Services segment was primarily the result of a change in strategy
from a focus on product development and services to solely a focus on service
offerings. The Company recognizes that an investment in research and
development is required to remain competitive; however, the Company expects
research and development costs to decrease in absolute dollars and as a
percentage of net revenue in fiscal year 2002 primarily due to the full year
impact of the sale and closing of operations of several companies and the
restructuring initiatives taken at several of its remaining subsidiaries.


                                       6


IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES:



                                 % of 2001           % of 2000
                                  Segment             Segment
                          2001  Net Revenue  2000   Net Revenue 2001 vs. 2000 % Change
                         ------ ----------- ------- ----------- ------------- --------
                                                (in thousands)
                                                            
Interactive Marketing... $  700     --      $50,117      27%      $(49,417)      (99)%
Infrastructure and En-
 abling
 Technologies...........    --      --       14,320      18%       (14,320)     (100)%
Other...................    762     --        1,246     --            (484)      (39)%
                         ------             -------               --------
Total................... $1,462     --      $65,683       7%      $(64,221)      (98)%
                         ======     ===     =======     ===       ========      ====


  The fiscal year 2001 in-process research and development expenses relate to
the one-time charges taken in connection with the acquisition of MediaBridge
in September 2000 and the Company's investment in Avamar Technologies, Inc.
The fiscal year 2000 in-process research and development expenses relate to
one-time charges taken in connection with the acquisitions of AdForce,
AdKnowledge, ExchangePath LLC (ExchangePath), Equilibrium, Flycast and Yesmail
and the Company's investment in AnswerLogic, Inc.

SELLING EXPENSES:



                                    % of 2001            % of 2000
                                     Segment              Segment
                            2001   Net Revenue   2000   Net Revenue 2001 vs. 2000 % Change
                          -------- ----------- -------- ----------- ------------- --------
                                                   (in thousands)
                                                                
Interactive Marketing...  $100,272      75%    $106,214      57%      $  (5,942)     (6)%
eBusiness and Fulfill-
 ment...................    57,620       8%      27,231       8%         30,389     112%
Search and Portals......   136,830      75%     249,391     105%       (112,561)    (45)%
Infrastructure and
 Enabling Technologies..    81,382      60%      59,009      75%         22,373      38%
Internet Professional
 Services...............     4,699       5%       7,112      17%         (2,413)    (34)%
Other...................    12,855     --         6,580     --            6,275      95%
                          --------             --------               ---------
Total...................  $393,658      32%    $455,537      51%      $ (61,879)    (14)%
                          ========     ===     ========     ===       =========     ===


  Selling expenses consisted primarily of advertising and other general
marketing related expenses, compensation and employee-related expenses, sales
commissions, facilities costs, tradeshow expenses and travel costs. Certain
costs related to fulfillment, including distribution and customer service
center expenses for activities such as receiving goods and picking of goods
for shipment within the Company's eBusiness and Fulfillment segment are
classified as selling expenses. Selling expenses decreased during fiscal year
2001 primarily due to a concerted effort by management to reduce sales and
marketing expenses throughout the Company as part of its restructuring
initiatives. The decrease in selling expenses within the Interactive Marketing
segment was primarily the result of the decrease in headcount and the
reduction in scope of certain sales and marketing campaigns as a result of the
restructuring initiatives at Engage, partially offset by the full year impact
of the fiscal year 2000 acquisition of Yesmail. The increase within the
eBusiness and Fulfillment segment was primarily the result of the full year
impact of the fiscal year 2000 acquisition of uBid, partially offset by the
sale of the Company's majority interest in Signatures. The decrease in the
Search and Portals segment was primarily the result of the reduction in
headcount and certain marketing campaigns at AltaVista, the closing of
operations of iCAST and the consolidation of technology platforms at MyWay.
The increase in the Infrastructure and Enabling Technologies segment was
primarily the result of the full year impact of the fiscal year 2000
acquisitions of Activate and Equilibrium and increased sales and marketing
efforts at NaviSite, partially offset by a decrease at NaviPath primarily as a
result of a reduction in headcount. The decrease within the Internet
Professional Services segment was primarily the result of the change in
strategy from a mix of product offerings and services to solely services,
partially offset by the full year impact of the acquisition of Tallan. The
increase in Other was primarily the result of the costs incurred to develop
and produce certain corporate marketing and

                                       7


advertising programs during fiscal year 2001. The Company anticipates its
selling costs to decrease in absolute dollars and as a percentage of net
revenue in fiscal year 2002 primarily due to the full year impact of the sale
and closing of operations of several companies and restructuring initiatives
taken at several of its remaining subsidiaries.

GENERAL AND ADMINISTRATIVE EXPENSES:



                                    % of 2001            % of 2000
                                     Segment              Segment
                            2001   Net Revenue   2000   Net Revenue 2001 vs. 2000 % Change
                          -------- ----------- -------- ----------- ------------- --------
                                                   (in thousands)
                                                                
Interactive Marketing...  $ 48,754      37%    $ 37,392      20%       $11,362       30%
eBusiness and Fulfill-
 ment...................    38,779       6%      29,274       8%         9,505       32%
Search and Portals......    29,966      16%      48,739      21%       (18,773)     (39)%
Infrastructure and
 Enabling Technologies..    65,972      48%      42,492      54%        23,480       55%
Internet Professional
 Services...............    19,780      21%      13,257      31%         6,523       49%
Other...................    77,854      --       47,110      --         30,744       65%
                          --------             --------                -------
Total...................  $281,105      23%    $218,264      25%       $62,841       29%
                          ========     ===     ========     ===        =======      ===


  General and administrative expenses consisted primarily of compensation,
facilities costs, bad debt and fees for professional services. The increase in
general and administrative expenses in 2001 compared to 2000 was primarily the
result of the full year impact of the fiscal year 2000 acquisitions, increased
bad debt expense related to the downturn in the Internet industry and the
building of infrastructure at the corporate level and at several of the
Company's subsidiaries, partially offset by the sale and closing of certain
companies and restructuring initiatives taken at several of the remaining
subsidiaries. The increase in the Interactive Marketing segment was primarily
the result of the full year impact of the fiscal year 2000 acquisitions of
AdKnowledge, Flycast and Yesmail, the fiscal 2001 acquisition of MediaBridge
and increased bad debt expense recorded by Engage, primarily related to its
media business, during fiscal year 2001. The increase in the eBusiness and
Fulfillment segment was primarily the result of the full year impact of the
acquisition of uBid, partially offset by the sale of a majority interest in
Signatures in fiscal year 2001. The decrease in the Search and Portals segment
was primarily the result of headcount reductions at AltaVista and MyWay and
the closing of operations at iCAST. The increase in the Infrastructure and
Enabling Technologies segment was primarily due to increased bad debt expense
and the building of management infrastructure at NaviSite and the full year
impact of the fiscal year 2000 acquisitions of Activate and Equilibrium,
partially offset by the closing of operations at 1stUp.com Corporation (1stUp)
and ExchangePath. The increase in the Internet Professional Services segment
was primarily the result of the full year impact of the acquisition of Tallan
during fiscal year 2000, partially offset by the sale of Nascent Technologies,
Inc. (Nascent) in January 2001. The increase in the Other expenses, which
includes certain administrative functions such as legal, finance and business
development which are not fully allocated to CMGI's subsidiary companies, was
primarily the result of the growth of CMGI's corporate infrastructure,
including higher personnel costs due to increased headcount, increased
information technology costs associated with an upgrade of the Company's
information systems and increased professional fees and facilities costs. The
Company anticipates its general and administrative costs to decrease in
absolute dollars and as a percentage of net revenue in fiscal year 2002
primarily due to the full year impact of the sale and closing of operations of
several companies and restructuring initiatives taken at several of its
remaining subsidiaries.


                                       8


AMORTIZATION OF INTANGIBLE ASSETS AND STOCK-BASED COMPENSATION:




                                      % of 2001              % of 2000
                                       Segment                Segment
                             2001    Net Revenue    2000    Net Revenue 2001 vs. 2000 % Change
                          ---------- ----------- ---------- ----------- ------------- --------
                                                     (in thousands)
                          (Restated)
                                                                          
Interactive Marketing...  $  467,923     351%    $  321,110     171%      $ 146,813      46%
eBusiness and Fulfill-
 ment...................     149,688      22%        40,914      12%        108,774     266%
Search and Portals......     652,584     358%       820,358     346%       (167,774)    (20)%
Infrastructure and
 Enabling Technologies..     139,881     103%       154,397     196%        (14,516)     (9)%
Internet Professional
 Services...............     147,870     157%        65,680     155%         82,190     125%
Other...................         218     --             216     --                2       1%
                          ----------             ----------               ---------
Total...................  $1,558,164     126%    $1,402,675     158%      $ 155,489      11%
                          ==========     ===     ==========     ===       =========     ===



  Amortization of intangible assets and stock-based compensation consisted
primarily of goodwill amortization expense related to acquisitions made during
fiscal year 2000, and, to a lesser degree, acquisitions made in fiscal 2001.
The intangible assets recorded as a result of these acquisitions are primarily
being amortized over periods ranging from two to five years. Included within
amortization of intangible assets and stock-based compensation expenses was
approximately $69.3 million and $84.9 million of stock-based compensation for
fiscal years 2001 and 2000, respectively. The increase in amortization in the
Interactive Marketing segment primarily reflects a full year of amortization
in fiscal year 2001 related to the fiscal year 2000 acquisitions of
AdKnowledge, Flycast and Yesmail and the fiscal year 2001 acquisition of
MediaBridge. This increase was partially offset by the effect of impairment
charges recorded during fiscal year 2001 related to certain intangible assets
of Engage and Yesmail, including $388.6 million recorded in the fourth
quarter. The increase in the eBusiness and Fulfillment segment primarily
reflects a full year of amortization in fiscal year 2001 related to the
acquisition of uBid. The decrease in the Search and Portals segment primarily
reflects impairment charges recorded during fiscal year 2001 related to
certain intangible assets of AltaVista and MyWay, including $219.5 million
recorded in the fourth quarter. The decrease in the Infrastructure and
Enabling Technologies segment was primarily the result of the closing of
operations at 1stUp, CMGion's subsidiary, AdForce, and ExchangePath during
fiscal year 2001, partially offset by a full year of amortization in fiscal
year 2001 related to certain fiscal year 2000 acquisitions. The increase in
the Internet Professional Services segment reflects a full year of
amortization in fiscal year 2001 related to the acquisition of Tallan. The
Company anticipates its amortization of intangible assets and stock-based
compensation costs to decrease in absolute dollars and as a percentage of net
revenue in fiscal year 2002 primarily due to the full year impact of the
impairment charges taken at several subsidiaries during fiscal 2001.


IMPAIRMENT OF LONG-LIVED ASSETS:




                                      % of 2001           % of 2000
                                       Segment             Segment
                             2001    Net Revenue  2000   Net Revenue 2001 vs. 2000 % Change
                          ---------- ----------- ------- ----------- ------------- --------
                                                   (in thousands)
                          (Restated)
                                                                       
Interactive Marketing...  $1,280,611     960%    $    --      --      $1,280,611       N/A
eBusiness and Fulfill-
 ment...................       7,138       1%      5,014       1%          2,124        42%
Search and Portals......   1,094,657     601%     11,814       5%      1,082,843     9,166%
Infrastructure and
 Enabling Technologies..     394,626     290%     13,332      17%        381,294     2,860%
Internet Professional
 Services...............     586,285     621%      4,045      10%        582,240    14,394%
                          ----------             -------              ----------
Total...................  $3,363,317     272%    $34,205       4%     $3,329,112     9,733%
                          ==========     ===     =======     ===      ==========    ======



  The Company records impairment charges as a result of management's ongoing
business review and impairment analysis performed under its existing policy
regarding impairment of long-lived assets. Where

                                       9



impairment indicators were identified, management determined the amount of the
impairment charge by comparing the carrying value of long-lived assets to
their fair value. Management determines fair value of goodwill and certain
other intangible assets based on a combination of the discounted cash flow
methodology, which is based upon converting expected future cash flows to
present value, and the market approach, which includes analysis of market
price multiples of companies engaged in lines of business similar to the
company. The market price multiples are selected and applied to the company
based on the relative performance, future prospects and risk profile of the
company in comparison to the guideline companies. Management predominately
utilizes third-party valuation reports in its determination of fair value. As
a result, during management's ongoing review of the value and periods of
amortization and depreciation of long-lived assets, it was determined that the
carrying value of certain long-lived assets was not fully recoverable. The
increase in impairment charges recorded in the Interactive Marketing segment
included the write-down of goodwill and other intangible assets at Engage
related to its media and software businesses of approximately $925.3 million,
of which approximately $384.4 million was recorded in the fourth quarter, and
the write-down of goodwill and other intangible assets at Yesmail of
approximately $355.4 million, of which approximately $4.2 million was recorded
in the fourth quarter. The increase in impairment charges recorded in the
Search and Portals segment primarily include the write-down of goodwill and
other intangible assets at AltaVista of approximately $990.0 million, of which
approximately $127.3 million was recorded in the fourth quarter, and the
write-down of goodwill and other intangible assets at MyWay of approximately
$101.1 million, of which approximately $92.2 million was recorded in the
fourth quarter. The increase in impairment charges recorded in the
Infrastructure and Enabling Technologies segment included the write-down of
goodwill and other intangible assets of approximately $335.8 million as a
result of the closing of operations at CMGion's subsidiary, AdForce, the
write-down of goodwill and other intangible assets at Activate of
approximately $30.4 million and the write-down of goodwill and other
intangible assets of approximately $22.7 million as a result of the closing of
operations at 1stUp. The increase in impairment charges recorded in the
Internet Professional Services segment related to the write-down of goodwill
and other intangible assets at Tallan of approximately $586.3 million, of
which $75.5 million was recorded in the fourth quarter. The other intangible
assets that were determined to be impaired within each segment primarily
related to a significant reduction in the acquired customer base and turnover
of workforce, which was in place at the time of the acquisitions. The
impairment factors evaluated by management may change in subsequent periods,
given that the Company operates in a volatile business environment. This could
result in material impairment charges in future periods.


RESTRUCTURING CHARGES:



                                   % of 2001           % of 2000
                                    Segment             Segment
                           2001   Net Revenue  2000   Net Revenue 2001 vs. 2000 % Change
                         -------- ----------- ------- ----------- ------------- --------
                                                 (in thousands)
                                                              
Interactive Marketing... $ 31,396      24%    $   --      --        $ 31,396       N/A
Search and Portals......   77,452      42%     14,770       6%        62,682       424%
Infrastructure and En-
 abling
 Technologies...........   95,247      70%        --      --          95,247       N/A
Internet Professional
 Services...............    2,043       2%        --      --           2,043       N/A
Other...................   11,081     --          --      --          11,081       N/A
                         --------             -------               --------
Total................... $217,219      18%    $14,770       2%      $202,449     1,371%
                         ========     ===     =======     ===       ========     =====


  The Company's restructuring initiatives involved strategic decisions to exit
certain businesses or to re-evaluate the current state of on-going businesses.
Restructuring charges consisted primarily of contract terminations, severance
charges and equipment charges incurred as a result of the cessation of
operations of certain subsidiaries and actions taken at several remaining
subsidiaries to increase operational efficiencies, improve margins and further
reduce expenses. Severance charges include employee termination costs as a
result of a reduction in workforce of approximately 1,700 positions and salary
expense for certain employees involved in the restructuring efforts. Employees
affected by the restructuring were notified both through direct personal

                                      10


contact and by written notification. The contract terminations primarily
consisted of costs to exit facility and equipment leases and to terminate
bandwidth and other vendor contracts. The asset impairment charges primarily
relate to the write-off of property and equipment. The restructuring charges
incurred in the Interactive Marketing segment primarily related to workforce
reductions of approximately 550 positions and the closing of several office
locations at Engage, future lease commitments of Engage for associated
servers, desktop computers and other telecommunications equipment and the
write-off of fixed assets by Engage. The restructuring charges incurred in the
Search and Portals segment during fiscal year 2001 primarily consisted of
workforce reductions of approximately 410 positions at AltaVista, the
termination of a contract with a significant customer and the termination of
other contracts by AltaVista in connection with the change in its business
strategy. Additional restructuring costs incurred in fiscal year 2001 in the
Search and Portals segment included the costs associated with the
consolidation of MyWay's technology platforms and the closing of operations at
iCAST. The restructuring charges incurred in the Infrastructure and Enabling
Technologies segment primarily related to severance costs, the termination of
several contracts and other exit costs at NaviPath and CMGion's subsidiary,
AdForce, in connection with the closing of their respective operations,
severance costs at 1stUp and the write-off of fixed assets by 1stUp and
ExchangePath. The increase in the Other expenses primarily related to
severance costs and future lease commitments of the Company's European
corporate operations and CMGI@Ventures.

OTHER INCOME/EXPENSE:

  Gain on issuance of stock by subsidiaries and affiliates increased $41.4
million, or 52%, to $121.8 million for fiscal year 2001 from $80.4 million for
fiscal year 2000. Gain on the issuance of stock by subsidiaries and affiliates
for fiscal year 2001 primarily relates to a pre-tax gain of approximately
$125.9 million on the issuance of stock by Engage in its acquisitions of
MediaBridge and Space Media Holdings Limited (Space) partially offset by a
pre-tax loss of approximately $5.0 million on the issuance of stock by Engage
to employees as a result of stock option exercises. Gain on issuance of stock
by subsidiaries and affiliates for fiscal year 2000 primarily reflects the
pre-tax gain of $51.9 million on the issuance of common stock by NaviSite in
connection with its initial public offering.

  Other gains (losses), net decreased $938.4 million, or 179%, to ($413.1)
million for fiscal year 2001 from $525.3 million for fiscal year 2000. Other
gains (losses), net for fiscal year 2001 primarily consisted of a pre-tax loss
of approximately $358.9 million on the sale of Pacific Century CyberWorks
Limited (PCCW) stock, a pre-tax loss of approximately $310.9 million related
to the write-down of the carrying value of certain available-for-sale
securities held by the Company, a pre-tax loss of approximately $187.5 million
on the write-down of the carrying value of the Company's restricted PCCW
stock, a pre-tax loss of approximately $145.7 related to the write-down of the
carrying value of certain @Ventures investments held by the Company, a pre-tax
loss of approximately $95.9 million on the sale of AltaVista's subsidiary,
Raging Bull, Inc. (Raging Bull), and a pre-tax loss of approximately $18.5
million on the sale of the Company's majority interest in Signatures,
partially offset by a pre-tax gain of approximately $357.4 million on the sale
of Lycos, Inc. (Lycos) stock, a pre-tax gain of approximately $135.3 million
on the sale of Kana Communications, Inc. (Kana) stock, a pre-tax gain of
approximately $88.4 million on the sale of Yahoo!, Inc. (Yahoo!) stock, a pre-
tax gain of approximately $64.2 million on the sale of Terra Networks, S.A.
(Terra Networks) stock, a pre-tax gain of approximately $70.9 million on the
sale of Critical Path, Inc. (Critical Path) stock and a pre-tax gain of
approximately $19.8 million on the sale of a real estate holding by AltaVista.
Other gains (losses), net for fiscal year 2000 primarily consisted of a pre-
tax gain of approximately $499.5 million on the sale of Yahoo! stock and a
pre-tax gain of approximately $53.6 million on the acquisition of Half.com,
Inc. (Half.com) by eBay, Inc. (eBay), partially offset by a pre-tax loss of
approximately $35.0 million on the write-down of the carrying value of an
available-for-sale security.


  Interest income increased $12.5 million to $54.0 million for fiscal year
2001 from $41.5 million for fiscal year 2000, reflecting increased interest
income associated with higher cash and cash equivalent balances, partially
offset by lower interest rates. Interest expense decreased $8.5 million to
$48.1 million for fiscal year 2001 from $56.6 million for fiscal year 2000,
primarily due to the payment in full of the principal on the notes issued in
connection with the acquisition of Tallan in fiscal year 2001 and due to the
settlement of a portion of the

                                      11


underlying debt associated with the borrowing arrangement entered into in
connection with a hedge of the Company's investment in Yahoo! stock.

  Equity in losses of affiliates resulted from the Company's minority
ownership in certain investments that are accounted for under the equity
method. Under the equity method of accounting, the Company's proportionate
share of each affiliate's operating losses and amortization of the Company's
net excess investment over its equity in each affiliate's net assets is
included in equity in losses of affiliates. Equity in losses of affiliates
decreased $6.2 million to $45.7 million for fiscal year 2001, from $51.9
million for fiscal year 2000, primarily reflecting the effect of the sale of
the Company's investment in Half.com to eBay and the effect of the impairment
charges taken during fiscal year 2002, partially offset by an increase due to
the Company's investment in B2E Solutions, LLC. The Company expects its
affiliate companies to continue to invest in the development of their products
and services, and to recognize operating losses, which will result in future
charges recorded by the Company to reflect its proportionate share of such
losses.

  Minority interest, net increased to $526.6 million for fiscal year 2001 from
$165.3 million for fiscal year 2000, primarily reflecting minority interest in
net losses of seven subsidiaries during fiscal year 2001, including AltaVista,
Engage, MyWay, NaviSite, CMGion, NaviPath and Tallan. The increase is
primarily related to an increase in the net losses reported by Engage and
AltaVista due to substantial amortization, impairment and restructuring
charges recorded during fiscal year 2001.


  Income tax benefit recorded for fiscal year 2001 was approximately $184.4
million and the Company's effective tax rates for fiscal 2001 and 2000 were 3%
and 8%, respecitvely. The Company's effective tax rate differs from the amount
computed by applying the U.S. federal income tax rate of 35 percent to pre-tax
loss primarily as a result of non-deductible goodwill amortization and
impairment charges, state taxes and valuation allowances recognized on
deferred tax assets. During the year ended July 31, 2001, the Company recorded
a valuation allowance against its gross deferred tax assets not expected to be
utilized as it is more likely than not that these assets will not be realized
in future years. Prior to fiscal 2001, the Company had recorded valuation
allowances against net deferred tax assets only with respect to majority owned
subsidiaries not included in the Company's federal consolidated tax return
group. The increase in the valuation allowance resulted in additional tax
expense of approximately $89.0 million for the year ended July 31, 2001.


Fiscal 2000 Compared to Fiscal 1999

NET REVENUE:



                                    As a % of FY            As a % of FY
                                   2000 Total Net          1999 Total Net
                            2000      Revenue       1999      Revenue     2000 vs. 1999 % Change
                          -------- -------------- -------- -------------- ------------- --------
                                                      (in thousands)
                                                                      
Interactive Marketing...  $187,348       21%      $ 26,830       14%        $160,518        598%
eBusiness and Fulfill-
 ment...................   345,177       39%       145,094       78%         200,083        138%
Search and Portals......   236,778       26%         8,238        5%         228,540      2,774%
Infrastructure and
 Enabling Technologies..    78,620        9%         6,101        3%          72,519      1,189%
Internet Professional
 Services...............    42,498        5%           126      --            42,372     33,629%
                          --------                --------                  --------
Total...................  $890,421      100%      $186,389      100%        $704,032        378%
                          ========      ===       ========      ===         ========     ======


  The increase in fiscal year 2000 net revenue compared to fiscal year 1999
was largely a result of acquisitions and increased net revenue growth at
existing companies during fiscal year 2000. The fiscal year 2000 acquisitions
accounted for approximately 77% of the net revenue increase. The increase in
net revenue within the Interactive Marketing segment was primarily the result
of the acquisitions of AdKnowledge, Flycast and Yesmail during fiscal year
2000 and increased net revenue from Engage due to an approximately $13.0
million transaction with Compaq Computer Corporation (Compaq), an affiliate of
CMGI, and the continued expansion of Engage's

                                      12


customer base. The increase in net revenue within the eBusiness and
Fulfillment segment was primarily the result of the acquisitions of uBid and
Signatures during fiscal year 2000 and increased volume of turnkey business
from Cisco Systems, Inc. (Cisco) at SalesLink. The increase in net revenue
within the Search and Portals segment was primarily the result of the
acquisition of AltaVista during fiscal year 2000. The increase in net revenue
within the Infrastructure and Enabling Technologies segment was primarily the
result of increased net revenue from NaviSite and NaviPath and the
acquisitions of Activate, AdForce and 1stUp during fiscal year 2000. The
increase in net revenue for NaviSite was primarily due to the growth in its
customer base facilitated by the build-out of its data center facilities. The
increase in net revenue for NaviPath during fiscal year 2000 primarily related
to the growth in users due to the expansion of its network coverage across the
United States and Canada. The increase in net revenue within the Internet
Professional Services segment was primarily the result of the acquisition of
Tallan during fiscal year 2000.

COST OF REVENUE:



                                    % of 2000            % of 1999
                                     Segment              Segment
                            2000   Net Revenue   1999   Net Revenue 2000 vs. 1999 % Change
                          -------- ----------- -------- ----------- ------------- --------
                                                   (in thousands)
                                                                
Interactive Marketing...  $130,198      69%    $ 20,866      78%      $109,332        524%
eBusiness and Fulfill-
 ment...................   293,942      85%     122,728      85%       171,214        140%
Search and Portals......   126,008      53%      10,041     122%       115,967      1,155%
Infrastructure and
 Enabling Technologies..   152,077     193%      25,827     423%       126,250        489%
Internet Professional
 Services...............    32,939      78%          91      72%        32,848     36,097%
                          --------             --------               --------
Total...................  $735,164      82%    $179,553      96%      $555,611        309%
                          ========     ===     ========     ===       ========     ======


  Cost of revenue consisted primarily of expenses related to the content,
connectivity and production associated with delivering the Company's products
and services. The increase was largely attributable to the increased net
revenue due to acquisitions and the acceleration of operations at existing
companies across each of the Company's five operating segments during fiscal
year 2000. The fiscal year 2000 acquisitions accounted for approximately 66%
of the increase in cost of revenue. Cost of revenue as a percentage of net
revenue for the Company decreased to 82% for fiscal year ended 2000 from 96%
for the prior fiscal year primarily as a result of the substantial net revenue
increases across each of the five operating segments and the impact of
companies acquired.

RESEARCH AND DEVELOPMENT EXPENSES:



                                    % of 2000           % of 1999
                                     Segment             Segment
                            2000   Net Revenue  1999   Net Revenue 2000 vs. 1999 % Change
                          -------- ----------- ------- ----------- ------------- --------
                                                  (in thousands)
                                                               
Interactive Marketing...  $ 31,807      17%    $ 8,699      32%      $ 23,108       266%
eBusiness and Fulfill-
 ment...................     2,571     --          --      --           2,571       N/A
Search and Portals......    89,661      38%     10,694     130%        78,967       738%
Infrastructure and
 Enabling Technologies..    26,906      34%      2,709      44%        24,197       893%
Internet Professional
 Services...............     2,985       7%        151     120%         2,834     1,877%
                          --------             -------               --------
Total...................  $153,930      17%    $22,253      12%      $131,677       592%
                          ========     ===     =======     ===       ========     =====


  Research and development expenses consisted primarily of personnel and
related costs to design, develop, enhance, test and deploy the Company's
product and service efforts either prior to the development effort reaching
technological feasibility or once the product had reached the maintenance
phase of its life cycle. Research and development expenses as a percentage of
net revenue increased during fiscal year 2000 primarily

                                      13


due to acquisitions and increased research and development efforts at existing
companies. The fiscal year 2000 acquisitions accounted for approximately 75%
of the increase in research and development expenses. The increase within the
Interactive Marketing segment was primarily the result of the acquisitions of
AdKnowledge, Flycast and Yesmail during fiscal year 2000 and increased
development efforts at Engage. The increase within the Search and Portals
segment was primarily the result of the acquisition of AltaVista during fiscal
year 2000 and the increased development efforts at iCAST and MyWay. The
increase in the Infrastructure and Enabling Technologies segment was primarily
the result of the acquisitions of Activate, AdForce, Equilibrium,
ExchangePath, 1stUp and Tribal Voice, Inc. (Tribal Voice) during fiscal year
2000 and increased development efforts at NaviSite. The increase within the
Internet Professional Services segment was primarily the result of increased
development efforts at CMGI Solutions, Inc. (CMGI Solutions) during fiscal
year 2000.

IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES:



                                  % of 2000          % of 1999
                                   Segment            Segment
                          2000   Net Revenue  1999  Net Revenue 2000 vs. 1999 % Change
                         ------- ----------- ------ ----------- ------------- --------
                                                (in thousands)
                                                            
Interactive Marketing... $50,117      27%    $4,500      17%       $45,617     1,014%
Search and Portals......     --      --         551       7%          (551)     (100)%
Infrastructure and
 Enabling
 Technologies...........  14,320      18%       --      --          14,320       N/A
Internet Professional
 Services...............     --      --       1,010     802%        (1,010)     (100)%
Other...................   1,246     --         --      --           1,246       N/A
                         -------             ------                -------
Total................... $65,683       7%    $6,061       3%       $59,622       984%
                         =======     ===     ======     ===        =======     =====


  The increase in fiscal year 2000 in-process research and development
expenses was the result of the acquisitions of AdForce, AdKnowledge,
ExchangePath, Equilibrium, Flycast and Yesmail and the Company's investment in
AnswerLogic, Inc.

SELLING EXPENSES:



                                    % of 2000           % of 1999
                                     Segment             Segment
                            2000   Net Revenue  1999   Net Revenue 2000 vs. 1999 % Change
                          -------- ----------- ------- ----------- ------------- --------
                                                  (in thousands)
                                                               
Interactive Marketing...  $106,214      57%    $19,368      72%      $ 86,846       448%
eBusiness and Fulfill-
 ment...................    27,231       8%      3,300       2%        23,931       725%
Search and Portals......   249,391     105%     11,849     144%       237,542     2,005%
Infrastructure and
 Enabling Technologies..    59,009      75%      9,119     149%        49,890       547%
Internet Professional
 Services...............     7,112      17%         76      60%         7,036     9,258%
Other...................     6,580     --        1,793     --           4,787       267%
                          --------             -------               --------
Total...................  $455,537      51%    $45,505      24%      $410,032       901%
                          ========     ===     =======     ===       ========     =====


  Selling expenses consisted primarily of advertising and other general
marketing related expenses, compensation and employee-related expenses, sales
commissions, facilities costs, trade show expenses and travel costs. Selling
expenses increased as a percentage of net revenue during fiscal year 2000
primarily due to acquisitions and the continued growth of the sales and
marketing efforts related to product launches and infrastructure at existing
companies. The fiscal year 2000 acquisitions accounted for approximately 76%
of the increase in selling expenses. The increase within the Interactive
Marketing segment was primarily the result of the acquisitions of AdKnowledge,
Flycast and Yesmail during fiscal year 2000 and increased sales and marketing
efforts at Engage. The increase within the Search and Portals segment was
primarily the result of the acquisition of AltaVista during fiscal year 2000
and the increased sales and marketing efforts related to new product launches

                                      14


and infrastructure at iCAST and MyWay. During fiscal year 2000, AltaVista
incurred approximately $110.7 million in advertising costs that primarily
related to a print and media advertising campaign. The increase in the
Infrastructure and Enabling Technologies segment was primarily the result of
the acquisitions of Activate, AdForce, Equilibrium, ExchangePath, 1stUp and
Tribal Voice during fiscal year 2000 and increased sales and marketing efforts
at NaviSite and NaviPath. The increase within the Internet Professional
Services segment was primarily the result of increased sales and marketing
efforts at CMGI Solutions during fiscal year 2000 and the acquisition of
Tallan.

GENERAL AND ADMINISTRATIVE EXPENSES:



                                    % of 2000           % of 1999
                                     Segment             Segment
                            2000   Net Revenue  1999   Net Revenue 2000 vs. 1999 % Change
                          -------- ----------- ------- ----------- ------------- --------
                                                  (in thousands)
                                                               
Interactive Marketing...  $ 37,392      20%    $ 6,003      22%      $ 31,389       523%
eBusiness and Fulfill-
 ment...................    29,274       8%     10,739       7%        18,535       173%
Search and Portals......    48,739      21%      9,557     116%        39,182       410%
Infrastructure and
 Enabling Technologies..    42,492      54%      6,189     101%        36,303       587%
Internet Professional
 Services...............    13,257      31%        708     562%        12,549     1,772%
Other...................    47,110     --       10,353     --          36,757       355%
                          --------             -------               --------
Total...................  $218,264      25%    $43,549      23%      $174,715       401%
                          ========     ===     =======     ===       ========     =====


  General and administrative expenses consisted primarily of compensation,
facilities costs and fees for professional services. General and
administrative expenses increased slightly as a percentage of net revenue
during fiscal year 2000 primarily due to acquisitions and the building of
management infrastructure at the corporate level and at several of the
Company's existing subsidiaries. The fiscal year 2000 acquisitions accounted
for approximately 48% of the increase in general and administrative expenses.
The increase in the Interactive Marketing segment was primarily the result of
the acquisitions of AdKnowledge, Flycast and Yesmail during fiscal year 2000
and the continued building of management infrastructure at Engage.
Approximately $5.0 million of the increase in the Interactive Marketing
segment specifically related to acquisition costs incurred by Engage related
to its acquisition of Adsmart Corporation (Adsmart) and Flycast from CMGI. The
increase in the eBusiness and Fulfillment segment was primarily the result of
the acquisitions of uBid and Signatures during fiscal year 2000 and the
building of management infrastructure at SalesLink. The increase in the Search
and Portals segment was primarily the result of the acquisition of AltaVista
during fiscal year 2000. The increase in the Infrastructure and Enabling
Technologies segment was primarily due to the acquisitions of Activate,
AdForce, Equilibrium, ExchangePath, 1stUp and Tribal Voice during fiscal year
2000 and the building of management infrastructure at NaviSite and NaviPath.
The increase in the Internet Professional Services segment was primarily the
result of the acquisition of Tallan. The increase in the Other expenses, which
includes certain administrative functions such as legal, finance and business
development which are not fully allocated to CMGI's subsidiary companies, was
primarily the result of the growth of CMGI's corporate infrastructure
including higher personnel costs due to increased headcount, increased
professional fees and facilities costs.

AMORTIZATION OF INTANGIBLE ASSETS AND STOCK-BASED COMPENSATION:




                                   % of 2000          % of 1999
                                    Segment            Segment
                           2000   Net Revenue  1999  Net Revenue 2000 vs. 1999 % Change
                         -------- ----------- ------ ----------- ------------- --------
                                                 (in thousands)
                                                             
Interactive Marketing... $321,110     171%    $9,872      37%      $311,238      3,152%
eBusiness and Fulfill-
 ment...................   40,914      12%     2,705       2%        38,209      1,413%
Search and Portals......  820,358     346%     2,230      27%       818,128     36,687%
Infrastructure and En-
 abling
 Technologies...........  154,397     196%       --      --         154,397        N/A



                                      15





                                     % of 2000           % of 1999
                                      Segment             Segment
                            2000    Net Revenue  1999   Net Revenue 2000 vs. 1999 % Change
                         ---------- ----------- ------- ----------- ------------- --------
                                                  (in thousands)
                                                                
Internet Professional
 Services...............     65,680     155%      1,320    1,048%        64,360    4,876%
Other...................        216     --          --       --             216      N/A
                         ----------             -------              ----------
Total................... $1,402,675     158%    $16,127        9%    $1,386,548    8,598%
                         ==========     ===     =======    =====     ==========    =====



  Amortization of intangible assets and stock-based compensation consisted
primarily of goodwill amortization expense related to acquisitions during
fiscal year 2000. The fiscal year 2000 acquisitions accounted for
approximately 93% of the increase in amortization of intangible assets and
stock-based compensation. The intangible assets recorded as a result of the
fiscal 2000 acquisitions are being amortized over periods ranging from two to
five years. Included within amortization of intangible assets and stock-based
compensation expenses was approximately $84.9 million and $1.5 million of
stock-based compensation for fiscal years 2000 and 1999, respectively.
Approximately $36.6 million of the fiscal 2000 amortization of stock-based
compensation expense was related to the acceleration of the vesting of options
to purchase approximately 323,000 shares of CMGI stock previously issued to
former executives of Flycast under pre-existing severance agreements. The
increase in the Interactive Marketing segment was primarily the result of the
acquisitions of AdKnowledge, Flycast and Yesmail during fiscal year 2000. The
increase in the eBusiness and Fulfillment segment was primarily the result of
the acquisitions of uBid and Signatures during fiscal year 2000. The increase
in the Search and Portals segment was primarily the result of the acquisition
of AltaVista during fiscal year 2000. Intangible assets related to the
AltaVista acquisition are being amortized primarily over a three year period.
The increase in the Infrastructure and Enabling Technologies segment was
primarily the result of the acquisitions of Activate, AdForce, Equilibrium,
ExchangePath, 1stUp and Tribal Voice during fiscal year 2000. The increase in
the Internet Professional Services segment was primarily the result of the
acquisition of Tallan during fiscal year 2000.

IMPAIRMENT OF LONG-LIVED ASSETS:



                                  % of 2000        % of 1999
                                   Segment          Segment
                          2000   Net Revenue 1999 Net Revenue 2000 vs. 1999 % Change
                         ------- ----------- ---- ----------- ------------- --------
                                               (in thousands)
                                                          
eBusiness and Fulfill-
 ment................... $ 5,014       1%    $--      --         $ 5,014      N/A
Search and Portals......  11,814       5%     --      --          11,814      N/A
Infrastructure and
 Enabling
 Technologies...........  13,332      17%     --      --          13,332      N/A
Internet Professional
 Services...............   4,045      10%     --      --           4,045      N/A
                         -------             ----                -------
Total................... $34,205       4%    $--      --         $34,205      N/A
                         =======     ===     ====     ===        =======      ===


  The Company records impairment charges as a result of management's ongoing
business review and impairment analysis performed under its existing policy
regarding impairment of long-lived assets. Where impairment indicators were
identified, management determined the amount of the impairment charge by
comparing the carrying value of long-lived assets to their fair value.
Management determines fair value of goodwill and certain other intangible
assets based on a combination of the discounted cash flow methodology, which
is based upon converting expected future cash flows to present value, and the
market approach, which includes analysis of market price multiples of
companies engaged in lines of business similar to the company. The market
price multiples are selected and applied to the company based on the relative
performance, future prospects and risk profile of the company in comparison to
the guideline companies. Management predominately utilizes valuation reports
in its determination of fair value. As a result, during management's ongoing
review of the value and periods of amortization and depreciation of long-lived
assets, it was determined that the carrying value of certain long-lived assets
were not fully recoverable. The impairment charges recorded in the eBusiness
and Fulfillment segment primarily relate to the write-down of goodwill at
SalesLink. The impairment charges recorded in the Search and Portals segment
primarily relate to the write-down of goodwill and other intangible

                                      16


assets at Magnitude Network, Inc. The impairment charges recorded in the
Infrastructure and Enabling Technologies segment relate to the write-down of
goodwill and other intangible assets related to the closing of the operations
at Activerse, Inc. The impairment charges recorded in the Internet
Professional Services segment related to the write-down of goodwill and other
intangible assets at CMGI Solutions. The other intangible assets that were
determined to be impaired within each segment primarily related to a
significant reduction in the acquired customer base and turnover of workforce,
which was in place at the time of the acquisition.

RESTRUCTURING CHARGES:

  During fiscal year 2000 the Company recorded approximately $14.8 million in
restructuring charges. The restructuring charges were incurred within the
Search and Portals segment and primarily consisted of a $12.3 million charge
incurred by AltaVista related to the renegotiation of a contract with a
significant customer.

OTHER INCOME/EXPENSE:

  Gains on issuance of stock by subsidiaries and affiliates decreased $50.3
million, or 39%, to $80.4 million for fiscal year 2000 from $130.7 million for
fiscal year 1999. Gains on the issuance of stock for fiscal year 2000
primarily related to a pre-tax gain of approximately $51.9 million on the
issuance of stock by NaviSite and a pre-tax gain of approximately $20.9
million on the issuance of stock by Vicinity Corporation (Vicinity) primarily
as a result of each company's respective initial public offerings. Gains on
issuance of stock by subsidiaries and affiliates for fiscal year 1999 included
a pre-tax gain of approximately $81.1 million on the issuance of stock by
Engage in its initial public offering, a pre-tax gain of approximately $20.3
million on issuance of stock by Lycos and a pre-tax gain of approximately
$29.4 million on issuance of stock by GeoCities.

  Other gains, net decreased $233.0 million, or 31%, to $525.3 million for
fiscal 2000 from $758.3 million for fiscal 1999. Other gains, net for fiscal
2000 primarily consisted of a pre-tax gain of approximately $499.5 million on
the sale of Yahoo! stock and a pre-tax gain of approximately $53.6 million on
the acquisition of Half.com by eBay, partially offset by a pre-tax loss of
$35.0 million on the write-down of the Company's Marketing Services Group,
Inc. (MSGI) stock. Other gains, net for fiscal 1999 consisted primarily of
pre-tax gains of approximately $661.2 million on the conversion of the
Company's GeoCities investment to Yahoo! stock, $45.5 million on the sale of
Lycos stock, $23.2 million on the sale of the Company's investment in
Reel.com, Inc. (Reel.com), and $19.1 million on the sale of the Company's
investment in Sage Enterprises, Inc.

  Interest income increased $36.9 million to $41.5 million for fiscal 2000
from $4.6 million for fiscal 1999, reflecting increased interest income
associated with higher average corporate cash equivalent balances compared
with the prior year and interest income earned by Engage and NaviSite on cash
raised from their initial public offerings. Interest expense increased $52.2
million to $56.6 million for fiscal 2000 from $4.4 million for fiscal 1999,
primarily due to approximately $596.9 million in notes issued as part of the
AltaVista and Tallan acquisitions.

  Equity in losses of affiliates resulted from the Company's minority
ownership in certain investments that are accounted for under the equity
method. Under the equity method of accounting, the Company's proportionate
share of each affiliate's operating losses and amortization of the Company's
net excess investment over its equity in each affiliate's net assets is
included in equity in losses of affiliates. Equity in losses of affiliates
increased $36.2 million to $51.9 million for fiscal year 2000, from $15.7
million for fiscal 1999, primarily reflecting an increased level of investment
activity by the Company during fiscal 2000.


  Minority interest increased to $165.3 million for fiscal 2000 from $2.3
million for fiscal 1999, primarily reflecting minority interest in net losses
of four subsidiaries during fiscal 2000, including AltaVista, Engage, MyWay
and NaviSite compared to $2.3 million for fiscal year 1999.

  The Company's effective tax rates for fiscal 2000 and 1999 were 8% and 43%,
respectively. The Company's effective tax rate differs materially from the
federal statutory rate primarily due to valuation allowances provided

                                      17


on certain deferred tax assets, the provision for state income taxes, and non-
deductible goodwill amortization and in-process research and development
charges.

 Liquidity and Capital Resources

  Working capital at July 31, 2001 decreased to $581.3 million compared to
$1.11 billion at July 31, 2000. The $528.8 million decrease in working capital
is primarily attributable to a $1.48 billion decrease in available-for-sale
securities and a $120.5 million decrease in accounts receivable, partially
offset by a $489.4 million decrease in notes payable, a $373.5 million
decrease in current deferred tax liabilities, a $154.0 million decrease in
accounts payable, accrued expenses and other liabilities, and a $71.0 million
increase in cash and cash equivalents. The Company's principal sources of
capital during the twelve months ended July 31, 2001 were from the sales of
approximately 8.4 million shares of Lycos stock for proceeds of $394.7
million, approximately 241.0 million shares of PCCW stock for proceeds of
$190.2 million, approximately 3.7 million shares of Kana stock for proceeds of
$137.6 million, approximately 6.8 million shares of Terra Networks stock for
proceeds of $78.3 million, approximately 1.3 million shares of Critical Path
stock for proceeds of $72.8 million, and approximately 1.3 million shares of
eBay stock for proceeds of $66.5 million. The Company's principal uses of
capital during the twelve months ended July 31, 2001 were $712.5 million for
funding operations, $122.4 million for purchases of property and equipment,
$75.5 million for investments in affiliates, primarily through the Company's
@Ventures venture capital funds, and $42.1 for repayments of obligations under
capital leases.


  Under the terms of an agreement with an investment bank entered into during
fiscal 2000, the Company agreed to deliver, at its discretion, either cash or
Yahoo! stock in three separate tranches, with maturity dates ranging from
August 2000 to February 2001. The Company executed the first tranche in April
2000 and received approximately $106.4 million. The Company subsequently
settled this tranche through the delivery of 581,499 shares of Yahoo! stock in
August 2000. In May 2000, the Company received approximately $68.5 million and
$5.7 million upon the execution of the second and third tranches,
respectively. The Company settled the second tranche for cash totaling
approximately $33.6 million in October 2000. The Company settled the third
tranche through the delivery of 47,684 shares of Yahoo! stock in February
2001. In November 2000, the Company entered into a new agreement to hedge the
Company's investment in 581,499 shares of Yahoo! stock. The Company received
approximately $31.5 million in connection with this agreement. Under the terms
of the new contract, the Company delivered 581,499 shares of Yahoo! stock in
August 2001.

  During the twelve months ended July 31, 2001, the Company, through its
limited liability company subsidiaries CMG@Ventures II, CMG@Ventures III,
CMGI@Ventures IV and CMG@Ventures Expansion acquired initial or follow-on
minority ownership interests in twenty-one Internet and technology companies
for an aggregate total of approximately $50.1 million.

  In August 2000 and February 2001, the Company issued approximately 313,000
and 2.0 million shares, respectively, of its common stock to Compaq, each as a
semi-annual interest payment of approximately $11.5 million related to notes
payable issued in the acquisition of AltaVista. During the twelve months ended
July 31, 2001, the Company issued approximately 30.2 million shares of its
common stock as payment of principal and interest totaling approximately
$391.6 million related to notes payable that had been issued in the Company's
acquisition of Tallan.

  In August 2000, the Company announced it had acquired the exclusive naming
and sponsorship rights to the New England Patriots' new stadium, to be known
as "CMGI Field," for a period of fifteen years. In return for the naming and
sponsorship rights, CMGI will pay $7.6 million per year for the first ten
years, with consumer price index adjustments for years eleven through fifteen.
CMGI will make its first semi-annual payment under this agreement in January
2002.

  In August 2000, the Company and Cable & Wireless plc, completed a previously
agreed to exchange of stock. CMGI received approximately 241.0 million shares
of PCCW stock from Cable & Wireless in exchange for approximately 13.4 million
shares of the Company's common stock.

                                      18


  During fiscal year 2001, the Company's subsidiary, Engage, completed two
acquisitions for combined consideration of approximately $254.9 million
consisting of approximately 14.9 million shares of Engage common stock valued
at approximately $225.6 million, options to purchase Engage common stock at
approximately $31.1 million and direct acquisition costs of approximately
$907,000.

  In June 2000, the Company's subsidiary, NaviSite, completed its financing of
certain of its data center infrastructure and capital equipment under a sale-
leaseback arrangement. The transaction has been accounted for as a financing
arrangement, wherein the property remains on NaviSite's books and will
continue to be depreciated. The total proceeds of $30.0 million were recorded
as a capital lease obligation and were being reduced based on payments under
the lease. In January 2001, NaviSite paid approximately $27.0 million to
settle the remaining capital lease obligation.

  Subsequent to July 31, 2001, the Company sold approximately 7.1 million
shares of Primedia, Inc. (Primedia) stock for total proceeds of approximately
$15.9 million.

  In August 2001, the Company issued approximately 5.4 million shares of its
common stock to Compaq as a semi-annual interest payment of $11.5 million
related to notes payable issued in the acquisition of AltaVista.

  In August 2001, the Company settled the final tranche under the borrowing
arrangement that hedges a portion of the Company's investment in the common
stock of Yahoo! through the delivery of 581,499 shares of Yahoo! common stock.

  The Company has been contacted by certain of the holders of its Series C
Convertible Preferred Stock regarding the potential restructuring or
retirement of all or a portion of such securities. The Company has engaged an
investment banker regarding possible resolutions. Such resolutions could
potentially involve the payment of cash, shares of CMGI's common stock, other
CMGI securities or other assets of CMGI. There can be no assurance that the
Company will successfully restructure or retire the Series C Convertible
Preferred Stock.

  The Company may determine to seek to restructure or retire some or all of
the promissory notes issued to Compaq. Such resolutions could potentially
involve the payment of cash, shares of CMGI securities or other assets of
CMGI. There can be no assurance that the Company will successfully restructure
or retire the promissory notes.

  The Company believes that existing working capital and the availability of
marketable securities, which could be sold or posted as collateral for
additional loans, will be sufficient to fund its operations, investments,
acquisitions of companies and technologies, and capital expenditures for at
least the next twelve months. Should additional capital be needed to fund
future operations or investment and acquisition activity, the Company may seek
to raise additional capital through the sale of certain subsidiaries, through
public or private offerings of the Company's or its subsidiaries' stock, or
through debt financing. There can be no assurance, however, that the Company
will be able to raise additional capital on terms that are favorable to the
Company.

  NaviSite

  On September 25, 2001, the Company's subsidiary, NaviSite, announced that it
expected to incur a charge (the "Impairment Charge") during the fourth quarter
of fiscal 2001 for impairment of long lived assets of $60.1 million. This
charge was expected to result from a lack of definitive cash funding in the
future to allow NaviSite to recover its investment in the impaired assets. As
a result of NaviSite's expectation, on September 25, 2001, the Company
announced that it expected to record a charge during the fourth quarter of
fiscal 2001 for impairment of long lived assets of $60.1 million. NaviSite is
currently exploring strategic alternatives and are making every reasonable
effort working with a particular strategic partner to provide NaviSite with
the definitive cash funding that would, among other things, allow NaviSite to
avoid recording the Impairment Charge. At the time of filing of this report,
the Company believes that it is reasonable to expect that NaviSite will not
record the Impairment Charge. There can be no assurance, however, that
NaviSite will be successful in such efforts. In the

                                      19


event that NaviSite is unable to secure such definitive cash funding in the
very near future, (i) NaviSite will record the Impairment Charge during the
fourth quarter of fiscal 2001 and (ii) the Company will record a charge during
the first quarter of fiscal 2002 for impairment of long lived assets of $60.1
million.

Factors That May Affect Future Results

  The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. Forward-
looking statements in this document and those made from time to time by the
Company through its senior management are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements concerning the expected future revenues or earnings or
concerning projected plans, performance, product development, product release
or product shipment, as well as other estimates related to future operations
are necessarily only estimates of future results and there can be no assurance
that actual results will not materially differ from expectations.

  Factors that could cause actual results to differ materially from results
anticipated in forward-looking statements include, but are not limited to, the
following:

  CMGI may not have operating income or net income in the future.

  During the fiscal year ended July 31, 2001, CMGI had an operating loss of
approximately $5.87 billion, and a net loss available to common stockholders
of approximately $5.50 billion. CMGI anticipates continuing to incur
significant operating expenses in the future, including significant costs of
revenue and selling, general and administrative and amortization expenses. As
a result, CMGI expects to continue to incur operating losses and may not have
enough money to grow its business in the future. CMGI can give no assurance
that it will achieve profitability or be capable of sustaining profitable
operations.


  CMGI may have problems raising money it needs in the future.

  In recent years, CMGI has financed its operating losses in part with profits
from selling some of the stock of companies in which CMGI had invested
directly or through the @Ventures funds. This funding source may not be
sufficient in the future, and CMGI may need to obtain funding from outside
sources. However, CMGI may not be able to obtain funding from outside sources.
In addition, even if CMGI finds outside funding sources, CMGI may be required
to issue to such outside sources securities with greater rights than those
currently possessed by holders of CMGI's currently outstanding securities.
CMGI may also be required to take other actions, which may lessen the value of
its common stock, including borrowing money on terms that are not favorable to
CMGI.

  CMGI's common stockholders may suffer dilution in the future upon the
  conversion and repayment of outstanding securities.

  CMGI has outstanding securities that have conversion or repayment provisions
that may result in substantial dilution to CMGI's common stockholders. CMGI
currently has 375,000 shares of Series C Convertible Preferred Stock issued
and outstanding. The Series C Convertible Preferred Stock is separated into
three tranches of 125,000 shares each with separate conversion prices: tranche
1 shares have a current conversion price of $45.72 per share; tranche 2 shares
have a current conversion price of $37.58 per share; and tranche 3 shares have
a current conversion price of $37.66 per share. The Series C Convertible
Preferred Stock may be converted into common stock by the holders at these
fixed prices at any time prior to June 30, 2002. On June 30, 2002, any
outstanding shares of Series C Convertible Preferred Stock automatically
convert into common stock at a conversion price equal to the average of the
closing bid prices of the common stock on the ten consecutive trading days
ending on the trading day prior to June 30, 2002. Subject to certain
limitations, when converted, the shares of Series C Convertible Preferred
Stock convert into the number of shares of common stock determined by taking
the $1,000 per share initial stated value, adding to such initial stated value
per share any completed or accrued dividend adjustments, and dividing such sum
by the applicable conversion price. Upon conversion of

                                      20


the Series C Convertible Preferred Stock into shares of CMGI's common stock,
the common stockholders will be diluted.

  The Company has been contacted by certain of the holders of its Series C
Convertible Preferred Stock regarding the potential restructuring or
retirement of all or a portion of such securities. The Company has engaged an
investment banker regarding possible resolutions. Such resolutions could
potentially involve the payment of cash, shares of CMGI's common stock, other
CMGI securities or other assets of CMGI. There can be no assurance that the
Company will successfully restructure or retire the Series C Convertible
Preferred Stock.

  In connection with CMGI's acquisition of AltaVista, CMGI issued to Compaq,
among other things, promissory notes in the aggregate principal amount of $220
million. The promissory notes are due on August 18, 2002. Interest on the
notes, accruing at a rate of 10.5% per annum, is due and payable semiannually
on each February 18 and August 18 until the notes are paid in full. Any
principal and interest on the notes is payable, at CMGI's option, in cash,
marketable securities or shares of CMGI common stock based on the average of
the closing prices of the common stock during the 15-day period ending on the
trading day immediately preceding the applicable payment date. If CMGI
determines to repay the principal and interest with shares of CMGI's common
stock, the common stockholders will be diluted.

  The Company may determine to seek to restructure or retire some or all of
the promissory notes issued to Compaq. Such resolutions could potentially
involve the payment of cash, shares of CMGI securities or other assets of
CMGI. There can be no assurance that the Company will successfully restructure
or retire the promissory notes.

  If CMGI fails to successfully execute on its segmentation strategy, its
   revenue, earnings prospects and business may be materially and adversely
   affected.

  CMGI has organized its majority-owned operating companies and venture
capital affiliates into six segments. These six segments include five
operational disciplines--Interactive Marketing; eBusiness and Fulfillment;
Search and Portals; Infrastructure and Enabling Technologies; and Internet
Professional Services--as
well as CMGI's affiliated venture capital arm, @Ventures. To successfully
implement its segmentation strategy, CMGI must achieve each of the following:

  .  overcome the difficulties of integrating its operating companies;

  .  decrease its cash burn rate;

  .  attain an optimal number of operating companies through acquisitions,
     consolidations, dispositions and divestitures; and

  .  improve its cash position and revenue base.

  If CMGI fails to address each of these factors, its business prospects for
achieving and sustaining profitability, and the market value of its securities
may be materially and adversely affected. Even if its implementation of this
segmentation strategy is successful, the revised structure and reporting
procedures of the new segmentation strategy may not lead to increased market
clarity or stockholder value. In addition, the execution of the segmentation
strategy, including planned reductions in the number of operating companies,
has resulted in restructuring charges being recorded by CMGI and could result
in restructuring charges being recorded in future periods.

  CMGI depends on certain important employees, and the loss of any of those
   employees may harm CMGI's business.

  CMGI's performance is substantially dependent on the performance of its
executive officers and other key employees, in particular, David S. Wetherell,
CMGI's chairman and chief executive officer, David Andonian, CMGI's president
and chief operating officer, and George A. McMillan, CMGI's chief financial
officer and

                                      21


treasurer. The familiarity of these individuals with the Internet industry
makes them especially critical to CMGI's success. In addition, CMGI's success
is dependent on its ability to attract, train, retain and motivate high
quality personnel, especially for its management team. The loss of the
services of any of CMGI's executive officers or key employees may harm its
business. CMGI's success also depends on its continuing ability to attract,
train, retain and motivate other highly qualified technical and managerial
personnel. Competition for such personnel is intense.

  CMGI may incur significant costs to avoid investment company status and may
   suffer adverse consequences if deemed to be an investment company.

  CMGI may incur significant costs to avoid investment company status and may
suffer other adverse consequences if deemed to be an investment company under
the Investment Company Act of 1940. Some of CMGI's equity investments in other
businesses and its venture subsidiaries may constitute investment securities
under the Investment Company Act. A company may be deemed to be an investment
company if it owns investment securities with a value exceeding 40% of its
total assets, subject to certain exclusions. Investment companies are subject
to registration under, and compliance with, the Investment Company Act unless
a particular exclusion or safe harbor provision applies. If CMGI were to be
deemed an investment company, CMGI would become subject to the requirements of
the Investment Company Act. As a consequence, CMGI would be prohibited from
engaging in business or issuing securities as it has in the past and might be
subject to civil and criminal penalties for noncompliance. In addition,
certain of CMGI's contracts might be voidable, and a court-appointed receiver
could take control of CMGI and liquidate its business.

  Although CMGI's investment securities currently comprise less than 40% of
its total assets, fluctuations in the value of these securities or of CMGI's
other assets may cause this limit to be exceeded. Unless an exclusion or safe
harbor was available to CMGI, CMGI would have to attempt to reduce its
investment securities as a percentage of its total assets. This reduction can
be attempted in a number of ways, including the disposition of investment
securities and the acquisition of non-investment security assets. If CMGI were
required to sell investment securities, CMGI may sell them sooner than it
otherwise would. These sales may be at depressed prices and CMGI may never
realize anticipated benefits from, or may incur losses on, these investments.
CMGI may be unable to sell some investments due to contractual or legal
restrictions or the inability to locate a suitable buyer. Moreover, CMGI may
incur tax liabilities when selling assets. CMGI may also be unable to purchase
additional investment securities that may be important to its operating
strategy. If CMGI decides to acquire non-investment security assets, CMGI may
not be able to identify and acquire suitable assets and businesses or the
terms on which CMGI is able to acquire such assets may be unfavorable.

  There may be conflicts of interest among CMGI, CMGI's affiliates and CMGI's
   officers, directors and stockholders.

  Some of CMGI's officers and directors also serve as officers or directors of
one or more of CMGI's affiliates. As a result, CMGI, CMGI's officers and
directors, and CMGI's affiliates may face potential conflicts of interest with
each other and with its stockholders. Specifically, CMGI's officers and
directors may be presented with situations in their capacity as officers or
directors of one of CMGI's affiliates that conflict with their fiduciary
obligations as officers or directors of CMGI or of another affiliate.

  CMGI's strategy of selling assets of, or investments in, the companies that
   it has acquired and developed presents risks.

  One element of CMGI's business plan involves raising cash for working
capital for its business by selling, in public or private offerings, some of
the companies, or portions of the companies, that it has acquired and
developed or in which it has invested. Market and other conditions largely
beyond CMGI's control affect:

  .  its ability to engage in such sales;

  .  the timing of such sales; and

                                      22


  .  the amount of proceeds from such sales.

  As a result, CMGI may not be able to sell some of these assets. In addition,
even if CMGI is able to sell, CMGI may not be able to sell at favorable prices
or on favorable terms. If CMGI is unable to sell these assets at favorable
prices and terms, its business will be harmed.

  CMGI's strategy of expanding its business through acquisitions of other
   businesses and technologies presents special risks.

  CMGI intends to continue to expand through the acquisition of businesses,
technologies, products and services from other businesses. Acquisitions
involve a number of special problems, including:

  .  difficulty integrating acquired technologies, operations, and personnel
     with the existing businesses;

  .  diversion of management attention in connection with both negotiating
     the acquisitions and integrating the assets;

  .  strain on managerial and operational resources as management tries to
     oversee larger operations;

  .  exposure to unforeseen liabilities of acquired companies;

  .  potential issuance of securities in connection with an acquisition with
     rights that are superior to the rights of holders of CMGI's currently
     outstanding securities;

  .  the need to incur additional debt; and

  .  the requirement to record potentially significant additional future
     operating costs for the amortization of goodwill and other intangible
     assets.

  CMGI may not be able to successfully address these problems. Moreover,
CMGI's future operating results will depend to a significant degree on its
ability to successfully manage growth and integrate acquisitions. In addition,
many of CMGI's investments are in early-stage companies with limited operating
histories and limited or no revenues. CMGI may not be able to successfully
develop these young companies.

  CMGI faces competition from other acquirors of and investors in Internet-
   related ventures which may prevent CMGI from realizing strategic
   opportunities.

  CMGI acquires or invests in existing companies that it believes are
complementary to its network and further its vision of the Internet. In
pursuing these opportunities, CMGI faces competition from other capital
providers and operators of Internet-related companies, including publicly
traded Internet companies, venture capital companies and large corporations.
Some of these competitors have greater financial resources than CMGI does.
This competition may limit CMGI's opportunity to acquire interests in
companies that could advance its vision of the Internet and increase its
value.

  CMGI's growth strategy and restructuring efforts place strain on its
   managerial, operational and financial resources.

  CMGI's growth strategy and restructuring efforts have placed, and are
expected to continue to place, a significant strain on its managerial,
operational and financial resources. CMGI's continued restructuring efforts
and future growth will increase this strain on its managerial, operational and
financial resources, inhibiting its ability to achieve the rapid execution
necessary to successfully implement its business plan.

  CMGI must develop and maintain positive brand name awareness.

  CMGI believes that establishing and maintaining its brand names is essential
to expanding its business and attracting new customers. CMGI also believes
that the importance of brand name recognition will increase in the

                                      23


future because of the growing number of Internet companies that will need to
differentiate themselves. Promotion and enhancement of CMGI's brand names will
depend largely on its ability to provide consistently high-quality products
and services. If CMGI is unable to provide high-quality products and services,
the value of its brand names will suffer and CMGI's business prospects may be
adversely affected.

  CMGI's quarterly results may fluctuate widely.

CMGI's operating results have fluctuated widely on a quarterly basis during
the last several years, and it expects to experience significant fluctuation
in future quarterly operating results. Many factors, some of which are beyond
CMGI's control, have contributed to these quarterly fluctuations in the past
and may continue to do so. Such factors include:

  .  demand for its products and services;

  .  payment of costs associated with its acquisitions, sales of assets and
     investments;

  .  timing of sales of assets;

  .  market acceptance of new products and services;

  .  charges for impairment of long-lived assets in future periods;

  .  potential restructuring charges in connection with CMGI's segmentation
     strategy;

  .  specific economic conditions in the industries in which CMGI competes;
     and

  .  general economic conditions.

  The emerging nature of the commercial uses of the Internet makes predictions
concerning CMGI's future revenues difficult. CMGI believes that period-to-
period comparisons of its results of operations will not necessarily be
meaningful and should not be relied upon as indicative of its future
performance. It is also possible that in some fiscal quarters, CMGI's
operating results will be below the expectations of securities analysts and
investors. In such circumstances, the price of CMGI's common stock may
decline.

  The price of CMGI's common stock has been volatile and may fluctuate based
   on the value of its assets.

  The market price of CMGI's common stock has been, and is likely to continue
to be, volatile, experiencing wide fluctuations. In recent years, the stock
market has experienced significant price and volume fluctuations, which have
particularly impacted the market prices of equity securities of many companies
providing Internet-related products and services. Some of these fluctuations
appear to be unrelated or disproportionate to the operating performance of
such companies. Future market movements may adversely affect the market price
of CMGI's common stock. In addition, should the market price of CMGI's common
stock drop below $1.00 per share for extended periods in the future, it risks
delisting from the Nasdaq National Market, which would have an adverse effect
on CMGI's business.

  In addition, a portion of CMGI's assets includes the equity securities of
both publicly traded and non-publicly traded companies. The market price and
valuations of the securities that CMGI holds may fluctuate due to market
conditions and other conditions over which CMGI has no control. Fluctuations
in the market price and valuations of the securities that CMGI holds in other
companies may result in fluctuations of the market price of CMGI's common
stock and may reduce the amount of working capital available to CMGI.

  CMGI relies on NaviSite for Web site hosting.

  CMGI and many of its operating companies rely on NaviSite for network
connectivity and hosting of servers. If NaviSite fails to perform such
services, CMGI's internal business operations may be interrupted, and the
ability of CMGI's operating companies to provide services to customers may
also be interrupted. Such interruptions may have an adverse impact on CMGI's
business and revenues and its operating companies.

                                      24


  The success of CMGI's operating companies depends greatly on increased use
   of the Internet by businesses and individuals.

  The success of CMGI's operating companies depends greatly on increased use
of the Internet for advertising, marketing, providing services and conducting
business. Commercial use of the Internet is currently at an early stage of
development and the future of the Internet is not clear. In addition, it is
not clear how effective Internet advertising is or will be, or how successful
Internet-based sales will be. The businesses of CMGI's operating companies
will suffer if commercial use of the Internet fails to grow in the future.

  CMGI's operating companies are subject to intense competition.

  The market for Internet products and services is highly competitive.
Moreover, the market for Internet products and services lacks significant
barriers to entry, enabling new businesses to enter this market relatively
easily. Competition in the market for Internet products and services may
intensify in the future. Numerous well-established companies and smaller
entrepreneurial companies are focusing significant resources on developing and
marketing products and services that will compete with the products and
services of CMGI operating companies. In addition, many of the current and
potential competitors of CMGI operating companies have greater financial,
technical, operational and marketing resources than those of CMGI operating
companies. CMGI operating companies may not be able to compete successfully
against these competitors. Competitive pressures may also force prices for
Internet goods and services down and such price reductions may reduce the
revenues of CMGI operating companies.

  If the United States or other governments regulate the Internet more
   closely, the businesses of CMGI's operating companies may be harmed.

  Because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. These laws and regulations may cover issues such
as privacy, pricing, taxation and content. The enactment of any additional
laws or regulations may impede the growth of the Internet and the Internet-
related business of CMGI operating companies and could place additional
financial burdens on their businesses.

  To succeed, CMGI's operating companies must respond to the rapid changes in
   technology and distribution channels related to the Internet.

  The markets for the Internet products and services of CMGI operating
companies are characterized by:

  .  rapidly changing technology;

  .  evolving industry standards;

  .  frequent new product and service introductions;

  .  shifting distribution channels; and

  .  changing customer demands.

  The success of CMGI operating companies will depend on their ability to
adapt to this rapidly evolving marketplace. They may not be able to adequately
adapt their products and services or to acquire new products and services that
can compete successfully. In addition, CMGI operating companies may not be
able to establish and maintain effective distribution channels.

  CMGI's operating companies face security risks.

  Consumer concerns about the security of transmissions of confidential
information over public telecommunications facilities is a significant barrier
to electronic commerce and communications on the Internet. Many factors may
cause compromises or breaches of the security systems CMGI operating companies
or other Internet sites use to protect proprietary information, including
advances in computer and software functionality

                                      25


or new discoveries in the field of cryptography. A compromise of security on
the Internet would have a negative effect on the use of the Internet for
commerce and communications and negatively impact CMGI operating companies'
businesses. Security breaches of their activities or the activities of their
customers and sponsors involving the storage and transmission of proprietary
information, such as credit card numbers, may expose CMGI operating companies
to a risk of loss or litigation and possible liability. CMGI cannot assure
that the security measures of CMGI operating companies will prevent security
breaches.

  The success of the global operations of CMGI's operating companies is
   subject to special risks and costs.

  CMGI operating companies have begun, and intend to continue, to expand their
operations outside of the United States. This international expansion will
require significant management attention and financial resources. The ability
of CMGI operating companies to expand their offerings of CMGI's products and
services internationally will be limited by the general acceptance of the
Internet and intranets in other countries. In addition, CMGI and its operating
companies have limited experience in such international activities.
Accordingly, CMGI and its operating companies expect to commit substantial
time and development resources to customizing the products and services of its
operating companies for selected international markets and to developing
international sales and support channels.

  CMGI expects that the export sales of its operating companies will be
denominated predominantly in United States dollars. As a result, an increase
in the value of the United States dollar relative to other currencies may make
the products and services of its operating companies more expensive and,
therefore, potentially less competitive in international markets. As CMGI
operating companies increase their international sales, their total revenues
may also be affected to a greater extent by seasonal fluctuations resulting
from lower sales that typically occur during the summer months in Europe and
other parts of the world.

  CMGI's operating companies could be subject to infringement claims.

  From time to time, CMGI operating companies have been, and expect to
continue to be, subject to third party claims in the ordinary course of
business, including claims of alleged infringement of intellectual property
rights. Any such claims may damage the businesses of CMGI operating companies
by:

  .  subjecting them to significant liability for damages;

  .  resulting in invalidation of their proprietary rights;

  .  being time-consuming and expensive to defend even if such claims are not
     meritorious; and

  .  resulting in the diversion of management time and attention.

  CMGI's operating companies may have liability for information retrieved from
   the Internet.

  Because materials may be downloaded from the Internet and subsequently
distributed to others, CMGI operating companies may be subject to claims for
defamation, negligence, copyright or trademark infringement, personal injury
or other theories based on the nature, content, publication and distribution
of such materials.

                                      26


ITEM 8.--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                           Page
                                                                           ----
                                                                        
Independent Auditors' Report..............................................  28
Consolidated Balance Sheets at July 31, 2001 and 2000.....................  29
Consolidated Statements of Operations for the years ended July 31, 2001,
 2000 and 1999............................................................  30
Consolidated Statements of Stockholders' Equity for the years ended July
 31, 2001, 2000 and 1999..................................................  31
Consolidated Statements of Cash Flows for the years ended July 31, 2001,
 2000 and 1999............................................................  33
Notes to Consolidated Financial Statements................................  34



                                       27


                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
CMGI, Inc.:

  We have audited the accompanying consolidated balance sheets of CMGI, Inc.
and subsidiaries as of July 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended July 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

  We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CMGI, Inc.
and subsidiaries as of July 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended July 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.

                                       /s/ KPMG LLP

Boston, Massachusetts
September 25, 2001, except as to Note 22,

which is as of October 29, 2001, and except


for the restatement referred to in Note 1 a,


as to which the date is December 11, 2001


                                      28


                          CMGI, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)




                                                               July 31,
                                                        -----------------------
                                                           2001         2000
                                                        -----------  ----------
                                                        (Restated)
                                                               
ASSETS
Current assets:
  Cash and cash equivalents...........................  $   710,704  $  639,666
  Available-for-sale securities.......................      110,134   1,595,011
  Accounts receivable, trade, net of allowance for
   doubtful accounts of $36,175 and $34,618 at July
   31, 2001 and 2000, respectively....................      111,593     232,104
  Prepaid expenses and other current assets...........       93,273     105,094
                                                        -----------  ----------
Total current assets..................................    1,025,704   2,571,875
                                                        -----------  ----------
Property and equipment, net...........................      209,554     259,270
Investments in affiliates.............................      239,127     583,648
Goodwill and other intangible assets, net of
 accumulated amortization of $2,886,811 and $1,516,045
 at July 31, 2001 and 2000, respectively..............      464,867   4,955,076
Other assets..........................................      149,679     187,238
                                                        -----------  ----------
                                                        $ 2,088,931  $8,557,107
                                                        ===========  ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable.......................................  $    33,594  $  523,022
  Current installments of long-term debt..............        6,213       6,649
  Accounts payable....................................       69,841     128,627
  Accrued restructuring...............................       95,552      13,683
  Accrued income taxes................................       35,912      36,318
  Accrued other.......................................      148,559     232,606
  Deferred income taxes...............................       18,860     392,340
  Other current liabilities...........................       35,857     128,525
                                                        -----------  ----------
Total current liabilities.............................      444,388   1,461,770
                                                        -----------  ----------
Long-term debt, less current installments.............      221,814     228,023
Deferred income taxes.................................       20,795      61,365
Other long-term liabilities...........................       19,097      50,945
Minority interest.....................................      186,440     586,062
Commitments and contingencies
Preferred stock, $0.01 par value. Issued 375,000
 shares of Series C redeemable, convertible preferred
 stock at July 31, 2001 and 2000, dividend at 2% per
 annum; carried at liquidation value..................      390,640     383,140
Stockholders' equity:
  Common stock, $0.01 par value per share. Authorized
   1,400,000,000 shares at July 31, 2001 and 2000;
   issued and outstanding 346,725,404 and 296,487,502
   shares at July 31, 2001 and 2000, respectively.....        3,467       2,965
  Additional paid-in capital..........................    7,138,132   6,190,182
  Deferred compensation...............................         (291)    (45,202)
  Accumulated deficit.................................   (6,353,233)   (857,814)
                                                        -----------  ----------
                                                            788,075   5,290,131
Accumulated other comprehensive income................       17,682     495,671
                                                        -----------  ----------
Total stockholders' equity............................      805,757   5,785,802
                                                        -----------  ----------
                                                        $ 2,088,931  $8,557,107
                                                        ===========  ==========



          see accompanying notes to consolidated financial statements

                                       29


                          CMGI, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)




                                                  Years ended July 31,
                                            -----------------------------------
                                               2001         2000        1999
                                            -----------  -----------  ---------
                                            (Restated)
                                                             
Net revenue...............................  $ 1,237,702  $   890,421  $ 186,389
Operating expenses:
 Cost of revenue..........................    1,131,778      735,164    179,553
 Research and development.................      158,960      153,930     22,253
 In-process research and development......        1,462       65,683      6,061
 Selling..................................      393,658      455,537     45,505
 General and administrative...............      281,105      218,264     43,549
 Amortization of intangible assets and
  stock-based compensation................    1,558,164    1,402,675     16,127
 Impairment of long-lived assets..........    3,363,317       34,205        --
 Restructuring............................      217,219       14,770        --
                                            -----------  -----------  ---------
   Total operating expenses...............    7,105,663    3,080,228    313,048
                                            -----------  -----------  ---------
   Operating loss.........................   (5,867,961)  (2,189,807)  (126,659)
                                            -----------  -----------  ---------
Other income (expense):
 Interest income..........................       54,033       41,521      4,640
 Interest expense.........................      (48,055)     (56,617)    (4,371)
 Gains on issuance of stock by subsidiar-
  ies and affiliates......................      121,794       80,387    130,729
 Other gains (losses), net................     (413,097)     525,265    758,312
 Equity in losses of affiliates...........      (45,661)     (51,886)   (15,737)
 Minority interest, net...................      526,623      165,271      2,331
                                            -----------  -----------  ---------
                                                195,637      703,941    875,904
                                            -----------  -----------  ---------
Income (loss) from continuing operations
 before income taxes......................   (5,672,324)  (1,485,866)   749,245
Income tax expense (benefit)..............     (184,404)    (121,173)   325,402
                                            -----------  -----------  ---------
Income (loss) from continuing operations..   (5,487,920)  (1,364,693)   423,843
Discontinued operations, net of income
 taxes:
 Gain on sale of CMG Direct Corporation...          --           --      53,203
 Loss from discontinued operations........          --           --        (806)
                                            -----------  -----------  ---------
Net income (loss).........................   (5,487,920)  (1,364,693)   476,240
Preferred stock accretion and amortization
 of discount..............................       (7,499)     (11,223)    (1,662)
                                            -----------  -----------  ---------
Net income (loss) available to common
 stockholders.............................  $(5,495,419) $(1,375,916) $ 474,578
                                            ===========  ===========  =========
Basic earnings (loss) per share:
 Earnings (loss) from continuing opera-
  tions available to common stockhold-
  ers.....................................  $    (16.67) $     (5.26) $    2.26
 Gain on sale of CMG Direct Corporation...          --           --        0.29
 Loss from discontinued operations........          --           --       (0.01)
                                            -----------  -----------  ---------
 Net earnings (loss) available to common
  stockholders............................  $    (16.67) $     (5.26) $    2.54
                                            ===========  ===========  =========
Diluted earnings (loss) per share:
 Earnings (loss) from continuing opera-
  tions available to common stockhold-
  ers.....................................  $    (16.67) $     (5.26) $    2.05
 Gain on sale of CMG Direct Corporation...          --           --        0.26
 Loss from discontinued operations........          --           --       (0.01)
                                            -----------  -----------  ---------
 Net earnings (loss) available to common
  stockholders............................  $    (16.67) $     (5.26) $    2.30
                                            ===========  ===========  =========
Shares used in computing earnings (loss)
 per share:
 Basic....................................      329,623      261,555    186,532
                                            ===========  ===========  =========
 Diluted..................................      329,623      261,555    206,832
                                            ===========  ===========  =========



          see accompanying notes to consolidated financial statements

                                       30


                          CMGI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      (in thousands, except share amounts)



                                            Accumulated                 Retained
                                Additional     other                    earnings       Total
                         Common  paid-in   comprehensive   Deferred   (accumulated stockholders'
                         stock   capital   income (loss) compensation   deficit)      equity
                         ------ ---------- ------------- ------------ ------------ -------------
                                                                 
Balance at July 31,
 1998 (184,271,544
 shares)...............   1,843     89,647       (436)       (1,442)       43,524      133,136
 Comprehensive income,
  net of taxes:
   Net income..........     --         --         --            --        476,240      476,240
   Other comprehensive
    income:
     Net unrealized
      holding gain
      arising during
      period...........     --         --     314,910           --            --       314,910
     Less:
      Reclassification
      adjustment for
      gain realized in
      net income.......     --         --      (6,120)          --            --        (6,120)
                                                                                    ----------
      Total
       comprehensive
       income..........                                                                785,030
                                                                                    ----------
 Conversion of
  redeemable preferred
  stock to common stock
  (1,168,008 shares)...      12     15,175        --            --            --        15,187
 Preferred stock
  accretion............     --         --         --            --         (1,662)      (1,662)
 Issuance of common
  stock pursuant to
  employee stock
  purchase plans and
  stock options
  (3,890,344 shares)...      39      7,915        --            --            --         7,954
 Issuance of common
  stock and common
  stock equivalents for
  acquisitions and
  investments
  (1,838,384 shares)...      18     63,882        --            --            --        63,900
 Amortization of
  deferred
  compensation.........     --         --         --          1,262           --         1,262
 Tax benefit of stock
  option exercises.....     --      43,202        --            --            --        43,202
 Effect of
  subsidiaries' equity
  transactions.........     --      14,452        --            --            --        14,452
                         ------ ----------   --------      --------    ----------   ----------
Balance at July 31,
 1999 (191,168,280
 shares)...............   1,912    234,273    308,354          (180)      518,102    1,062,461
 Comprehensive loss,
  net of taxes:
   Net loss............     --         --         --            --     (1,364,693)  (1,364,693)
   Other comprehensive
    income:
     Net unrealized
      holding gain
      arising during
      period...........     --         --     496,304           --            --       496,304
     Less:
      Reclassification
      adjustment for
      gain realized in
      net loss.........     --         --    (308,987)          --            --      (308,987)
                                                                                    ----------
      Total
       comprehensive
       loss............     --         --         --            --            --    (1,177,376)
                                                                                    ----------
Preferred stock
 accretion.............     --         --         --            --         (8,516)      (8,516)
Amortization of
 discount on preferred
 stock.................     --       2,707        --            --         (2,707)         --
Conversion of
 redeemable preferred
 stock to common stock
 (2,834,520 shares)....      28     36,357        --            --            --        36,385
Issuance of common
 stock pursuant to
 employee stock
 purchase plans and
 stock options
 (8,279,232 shares)....      83     39,137        --            --            --        39,220
Issuance of common
 stock and common stock
 equivalents for
 acquisitions and
 investments
 (94,205,470 shares)...     942  5,676,877        --        (75,265)          --     5,602,554
 Amortization of
  deferred
  compensation.........     --         --         --         30,243           --        30,243
 Tax benefit of stock
  option exercises.....     --     189,944        --            --            --       189,944
 Effect of
  subsidiaries' equity
  transactions, net....     --      10,887        --            --            --        10,887
                         ------ ----------   --------      --------    ----------   ----------
Balance at July 31,
 2000 (296,487,502
 shares)...............  $2,965 $6,190,182   $495,671      $(45,202)   $ (857,814)  $5,785,802


                                       31


                          CMGI, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
                      (in thousands, except share amounts)




                                             Accumulated                 Retained
                                Additional      other                    earnings        Total
                         Common  paid-in    comprehensive   Deferred   (accumulated  stockholders'
                         stock   capital    income (loss) compensation   deficit)       equity
                         ------ ----------  ------------- ------------ ------------  -------------
                                                                   
Balance carried forward
 from previous page at
 July 31, 2000
 (296,487,502 shares)..  $2,965 $6,190,182    $ 495,671     $(45,202)  $  (857,814)   $ 5,785,802
 Comprehensive loss,
  net of taxes:
   Net loss
    (Restated).........      --         --           --           --    (5,487,920)    (5,487,920)
   Other comprehensive
    income:
     Net unrealized
      holding loss
      arising during
      period...........      --         --     (794,446)          --            --       (794,446)
     Less:
      Reclassification
      adjustment for
      loss realized in
      net loss
      (Restated).......      --         --      316,457           --            --        316,457
                                                                                      -----------
      Total
       comprehensive
       loss
       (Restated)......      --         --           --           --            --     (5,965,909)
                                                                                      -----------
 Preferred stock
  accretion............      --         --           --           --        (7,499)        (7,499)
 Issuance of common
  stock pursuant to
  employee stock
  purchase plans and
  stock options
  (4,059,413 shares)...      40     11,986           --           --            --         12,026
 Issuance of common
  stock for investments
  and payments on notes
  payable and long-term
  debt (46,178,489
  shares)..............     462    963,473           --           --            --        963,935
 Amortization of
  deferred
  compensation.........      --         --           --       44,911            --         44,911
 Tax benefit of stock
  option exercises and
  reduction of
  previously recorded
  benefits, net........      --    (29,587)          --           --            --        (29,587)
 Effect of
  subsidiaries' equity
  transactions, net....      --      2,078           --           --            --          2,078
                         ------ ----------    ---------     --------   -----------    -----------
Balance at July 31,
 2001 (346,725,404
 shares) (Restated)....  $3,467 $7,138,132    $  17,682     $   (291)  $(6,353,233)   $   805,757
                         ====== ==========    =========     ========   ===========    ===========





          see accompanying notes to consolidated financial statements

                                       32


                          CMGI, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)




                                                  Years ended July 31,
                                            -----------------------------------
                                               2001         2000        1999
                                            -----------  -----------  ---------
                                            (Restated)
                                                             
Cash flows from operating activities:
 Income (loss) from continuing
  operations..............................  $(5,487,920) $(1,364,693) $ 423,843
 Adjustments to reconcile income (loss)
  from continuing operations to net cash
  used for continuing operations:
   Depreciation, amortization and
    impairment charges....................    5,109,409    1,501,583     22,669
   Deferred income taxes..................     (234,145)    (280,450)   312,445
   Non-operating gains (losses), net......      291,303     (605,652)  (889,041)
   Equity in losses of affiliates.........       45,661       51,886     15,737
   Minority interest......................     (526,623)    (165,271)    (2,331)
   In-process research and development....        1,462       65,683      6,061
   Changes in operating assets and
    liabilities, excluding effects from
    acquired and divested subsidiaries:
     Trade accounts receivable............      117,535      (91,383)   (17,208)
     Prepaid expenses and other current
      assets..............................       (5,390)     (42,191)    (2,764)
     Accounts payable and accrued
      expenses............................       26,919       19,984     34,749
     Refundable and accrued income taxes,
      net.................................      (28,611)     (46,712)   (41,003)
     Tax benefit from exercise of stock
      options.............................          --       189,944     43,202
     Other assets and liabilities.........      (22,138)       3,538      3,557
                                            -----------  -----------  ---------
Net cash used for operating activities of
 continuing operations....................     (712,538)    (763,734)   (90,084)
Net cash used for operating activities of
 discontinued operations..................          --           --        (280)
                                            -----------  -----------  ---------
Net cash used for operating activities....     (712,538)    (763,734)   (90,364)
                                            -----------  -----------  ---------
Cash flows from investing activities:
 Additions to property and equipment--
  continuing operations...................     (122,380)    (177,637)   (16,211)
 Additions to property and equipment--
  discontinued operations.................          --           --         (63)
 Proceeds from sale of property and
  equipment...............................       35,779          --         --
 Proceeds from liquidation of stock
  investments.............................      979,933    1,143,574     84,668
 Proceeds from sale of CMG Direct
  Corporation--discontinued operations....          --           --      12,835
 Cash impact of acquisitions and
  divestitures of subsidiaries............      (14,432)    (185,127)   (54,016)
 Investments in affiliates................      (75,540)    (299,330)   (48,211)
 Net proceeds from maturities of
  (purchases of) available-for-sale
  securities..............................        9,995       11,182    (31,123)
 Other, net...............................         (240)        (301)     1,510
                                            -----------  -----------  ---------
Net cash provided by (used for) investing
 activities...............................      813,115      492,361    (50,611)
                                            -----------  -----------  ---------
Cash flows from financing activities:
 Net proceeds from (repayments of)
  obligations under capital leases........      (42,106)      47,299       (648)
 Net proceeds from (repayments of) notes
  payable.................................       (2,082)     160,672     (6,654)
 Repayments of long-term debt.............       (6,645)      (4,935)    (5,609)
 Net proceeds from issuance of Series B
  and Series C redeemable, convertible
  preferred stock.........................          --           --     424,805
 Net proceeds from issuance of common
  stock...................................       19,913       47,237      7,613
 Net proceeds from issuance of stock by
  subsidiaries............................        6,713      209,207    129,461
 Other....................................       (5,332)     (17,353)      (618)
                                            -----------  -----------  ---------
Net cash provided by (used for) financing
 activities...............................      (29,539)     442,127    548,350
                                            -----------  -----------  ---------
Net increase in cash and cash
 equivalents..............................       71,038      170,754    407,375
Cash and cash equivalents at beginning of
 year.....................................      639,666      468,912     61,537
                                            -----------  -----------  ---------
Cash and cash equivalents at end of year..  $   710,704  $   639,666  $ 468,912
                                            ===========  ===========  =========



          see accompanying notes to consolidated financial statements

                                       33


                          CMGI, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)Nature of Operations

  CMGI, Inc. (together with its consolidated subsidiaries, "CMGI" or the
"Company") is a diversified Internet operating and development company. The
Company's subsidiaries have been classified in the following five operating
segments: (i) Interactive Marketing, (ii) eBusiness and Fulfillment, (iii)
Search and Portals, (iv) Infrastructure and Enabling Technologies and (v)
Internet Professional Services. CMGI's affiliated venture capital arm is
comprised of several venture capital funds that focus on investing in
companies involved in various aspects of the Internet and Internet technology.
CMGI's business strategy over the years has led to the development,
acquisition and operation of majority-owned subsidiaries focused on the
Internet and Internet technologies, as well as the strategic investment in
other Internet companies that have demonstrated synergies with CMGI's core
businesses. The Company's strategy also envisions and promotes opportunities
for synergistic business relationships among its subsidiaries, investments and
affiliates.





(1 a) Restatement




  In the process of finalizing the Company's financial statements for the
quarter ended October 31, 2001, the Company discovered that inadvertent errors
had been made in the calculation of certain amounts included in the Company's
audited financial statements for the year ended July 31, 2001 included in the
Form 10-K. These errors related to the recording of impairment and
amortization charges in consolidation of intangible assets associated
primarily with AltaVista and Engage, subsidiaries of the Company. An
inadvertent error was also made in the recording of certain amounts related to
the other-than-temporary impairment of the Company's marketable security
investment in Primedia, Inc. Accordingly, the Company has restated its
financial statements to reflect the correction of these inadvertent errors and
has taken remedial action over the consolidation process that the Company
believes will prevent or detect future such errors. Conforming changes
reflecting these corrections have been made in the Company's Selected
Consolidated Financial Data, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Consolidated Financial Statements and
Notes thereto. See Notes 3, 6, 8, 9, 13, 18, 20 and 21.


  The effects of this restatement on previously reported consolidated
financial statements as of and for the year ended July 31, 2001 include the
following changes (in thousands, except per share amounts):


Consolidated Statements of Operations:




                                                        Year Ended July 31,
                                                               2001
                                                      ------------------------
                                                      As Reported   Restated
                                                      -----------  -----------
                                                             
Amortization of intangible assets and stock-based
 compensation........................................ $ 1,490,714  $ 1,558,164
Impairment of long-lived assets......................   3,334,133    3,363,317
Operating loss.......................................  (5,771,327)  (5,867,961)
Other gains (losses), net............................    (357,547)    (413,097)
Minority interest, net...............................     507,652      526,623
Loss before income taxes.............................  (5,539,111)  (5,672,324)
Income tax expense (benefit).........................    (161,531)    (184,404)
Net loss.............................................  (5,377,580)  (5,487,920)
Net loss available to common stockholders............  (5,385,079)  (5,495,419)
Basic and diluted loss per share.....................      (16.34)      (16.67)

Consolidated Balance Sheets:

                                                           July 31, 2001
                                                      ------------------------
                                                      As Reported   Restated
                                                      -----------  -----------
                                                             
Goodwill and other intangible assets, net of accumu-
 lated amortization.................................. $   561,501  $   464,867
Total assets.........................................   2,185,565    2,088,931
Minority interest....................................     205,411      186,440
Accumulated deficit..................................  (6,242,893)  (6,353,233)
Accumulated other comprehensive income (loss)........     (14,995)      17,682
Total stockholders' equity...........................     883,420      805,757



                                      34



                       CMGI, INC. AND SUBSIDIARIES


         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


(2)Summary of Significant Accounting Policies

  Principles of Consolidation and Presentation

  The consolidated financial statements of the Company include its wholly-
owned and majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The Company accounts
for investments in businesses in which it owns less than 50% using the equity
method, if the Company has the ability to exercise significant influence over
the investee company. All other investments for which the Company does not
have the ability to exercise significant influence or for which there is not a
readily determinable market value, are accounted for under the cost method of
accounting. Certain amounts for prior periods have been reclassified to
conform to current year presentations.

  Certain costs related to the purchase price of products sold, inbound and
outbound shipping charges, packing supplies and other costs associated with
marketplace business of the Company's eBusiness and Fulfillment segment are
classified as cost of revenue. Certain costs related to fulfillment, including
distribution and customer service center expenses for activities such as
receiving goods and picking of goods for shipment within the Company's
eBusiness and Fulfillment segment are classified as selling expenses.

  Revenue Recognition

  The Company's advertising revenue is derived primarily from the delivery of
advertising impressions through its own or third-party Web sites. Revenue is
recognized in the period that the advertising impressions are delivered,
provided the collection of the resulting receivable is probable.

  Revenue from software product licenses, database services and website
traffic audit reports are generally recognized when (i) a signed non-
cancelable software license exists, (ii) delivery has occurred, (iii) the
Company's fee is fixed or determinable, and (iv) collection is probable.

  Revenue from software maintenance is deferred and recognized ratably over
the term of each maintenance agreement, typically twelve months. Revenue from
professional services is recognized as the services are performed, collection
is probable and such revenues are contractually nonrefundable. Revenue from
multiple element arrangements involving products, services and support
elements is recognized in accordance with SOP 98-9, "Software Revenue
Recognition with Respect to Certain Arrangements," when vendor-specific
objective evidence of fair value does not exist for the delivered element. As
required by SOP 98-9, under the residual method, the fair value of the
undelivered elements are deferred and subsequently recognized. The Company
establishes sufficient vendor-specific objective evidence of fair value for
services and support elements based on the price charged when these elements
are sold separately. Accordingly, software license revenue for products
developed is recognized under the residual method in arrangements in which the
software is sold with one or both of the other elements. Revenue from license
agreements that require significant customizations and modifications to the
software product is deferred and recognized using the percentage of completion
method using labor hours as the primary measure towards completion. For
license arrangements involving customizations for which the amount of
customization effort cannot be reasonably estimated or when license
arrangements provide for customer acceptance, we recognize revenue under the
completed contract method of accounting.

  Revenue from sales of merchandise is recognized upon shipment of the
merchandise and verification of the customer's credit card authorization or
receipt of cash. All shipping and handling fees billed to customers are
recognized as revenue and related costs as costs of revenue when incurred, as
long as the Company takes title to the products or assumes the risks and
rewards of ownership.

                                      35


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Revenue from e-mail based direct marketing is recognized upon delivery of
the e-mail to the target audience that represents substantial completion of
the contract obligation.

  Substantially all media and media management revenue is recognized on a
gross basis and amounts paid to Web sites where advertisements appear are
recorded as cost of revenue. Revenue is generally recognized gross of the
related Web site expense in arrangements in which the Company acts as the
principal in the transaction. Revenue is recognized net of the related Web
site expense in arrangements in which the Company primarily acts as a sales
agent.

  Revenue from server hosting, systems administration, application rentals and
Web site management services is generally billed and recognized over the term
of the contract based on actual usage.

  As a result of the adoption of Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements", during fiscal year 2001, the
Company determined that installation services performed by its subsidiary,
NaviSite, do not represent a separate earning process. Therefore, revenue from
such installation services is deferred and recognized over the contractual
term of the arrangement. Prior to the adoption of SAB No. 101, the Company
recognized revenue for installation services upon installation. The associated
incremental costs are recognized as incurred.

  The Company adopted SAB No. 101 and Emerging Issues Task Force (EITF) No.
99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" during
the fourth quarter of fiscal year 2001 and accordingly recognized an
adjustment for approximately $27.6 million. The adjustment reduced both net
revenue and cost of revenue by $8.1 million, $7.7 million and $11.8 million,
respectively for each of the first three quarters of fiscal year 2001. An
adjustment of $7.6 million was also recorded to net revenue in the fourth
quarter of fiscal year 2000. The adoption of SAB No. 101 also reflects a
change in the recognition of certain revenues within the eBusiness and
Fulfillment segment from a gross basis to a net basis. These adjustments had
no impact on operating loss.

  Amounts billed prior to satisfying the above revenue recognition criteria
are classified as deferred revenue.

  Gains on Issuance of Stock by Subsidiaries and Affiliates

  At the time a subsidiary sells its stock to unrelated parties at a price in
excess of its book value, the Company's net investment in that subsidiary
increases. If at that time, the subsidiary is not a newly formed, non-
operating entity, nor a research and development, start-up or development
stage company, nor is there question as to the subsidiary's ability to
continue in existence, the Company records the increase in its Consolidated
Statements of Operations. Otherwise, the increase is reflected in "Effect of
subsidiaries' equity transactions" in the Company's Consolidated Statements of
Stockholders' Equity.

  If gains have been recognized on issuances of a subsidiary's stock and
shares of the subsidiary are subsequently repurchased by the subsidiary or by
the Company, gain recognition does not occur on issuance subsequent to the
date of a repurchase until such time as shares have been issued in an amount
equivalent to the number of repurchased shares. Such transactions are
reflected as equity transactions, and the net effect of these transactions is
reflected in the Consolidated Statements of Stockholders' Equity.

  Cash Equivalents and Statement of Cash Flows Supplemental Information

  Highly liquid investments with original maturities of three months or less
at the time of acquisition are considered cash equivalents.

                                      36


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Net cash used for operating activities reflect cash payments for interest
and income taxes, net of income tax refunds received, as follows:



                                                          Years ended July 31,
                                                         -----------------------
                                                          2001    2000    1999
                                                         ------- ------- -------
                                                             (in thousands)
                                                                
     Interest........................................... $ 6,428 $16,143 $ 3,910
                                                         ======= ======= =======
     Income taxes....................................... $20,213 $14,574 $10,764
                                                         ======= ======= =======


  Portions of the consideration for acquisitions of businesses by the Company,
or its subsidiaries, during fiscal years 2001, 2000 and 1999 included the
issuance of shares of the Company's and its subsidiaries' common stock and the
issuance of seller's notes (see note 8).

  During fiscal year 2001, significant non-cash investing activities included
the issuance of approximately 2.3 million shares of the Company's common stock
to Compaq as consideration for $23.0 million in annual interest payments due
on the notes payable issued in conjunction with the acquisition of AltaVista.
Also during the year ended July 31, 2001, the Company issued approximately
30.2 million shares of its common stock as payment of principal and interest
totaling approximately $391.6 million related to notes payable that had been
issued in the Company's acquisition of Tallan. In August 2000, the Company and
Cable & Wireless plc, completed a previously agreed to exchange of stock. CMGI
received approximately 241.0 million shares of PCCW stock from Cable &
Wireless in exchange for approximately 13.4 million shares of the Company's
common stock.

  During fiscal year 2001, the Company settled the first and third tranches of
an agreement (see Note 14) that hedged a portion of the Company's investment
in common stock of Yahoo! through the delivery of 581,499 and 47,684 shares of
Yahoo! common stock, respectively, to an investment bank.

  During fiscal year 2001, Yahoo! acquired eGroups, Inc., an @Ventures
investee company. In connection with the merger, CMG@Ventures III received
approximately 91,000 shares of Yahoo! common stock.

  In August, 2000 and September, 2000, respectively, Engage completed the
acquisitions of Space and MediaBridge in exchange for its own common stock
(see Note 8).

  During fiscal year 2000, significant non-cash investing activities included
the exchange of stock between the Company and the following companies: divine,
inc. (Divine), Primedia, Netcentives, Inc. (Netcentives) and PCCW. During
fiscal year 2000 the Company also completed the sale of the Company's
investment in Half.com in exchange for eBay common stock.

  During fiscal year 1999, significant non-cash investing activities included
the sale of the Company's investments in GeoCities, Reel.com and Sage
Enterprises, Inc. in exchange for common stock of Yahoo!, Hollywood
Entertainment Corporation (Hollywood Entertainment) and Amazon.com, Inc.
(Amazon), respectively (see note 13). In addition, the Company completed the
sale of its wholly-owned subsidiary, CMG Direct Corporation (CMG Direct) to
MSGI in exchange for cash and shares of MSGI common stock (see note 4).

  Fair Value of Financial Instruments

  The carrying value for cash and cash equivalents, accounts receivable,
accounts payable and notes payable approximates fair value because of the
short maturity of these instruments. The carrying value of long-term debt

                                      37


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximates its fair value, as estimated by using discounted future cash
flows based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.

  Investments

  Marketable securities held by the Company which meet the criteria for
classification as available-for-sale are carried at fair value, net of market
discount to reflect any restrictions on transferability. Unrealized holding
gains and losses on securities classified as available-for-sale are carried
net of taxes as a component of "Accumulated other comprehensive income (loss)"
in the Consolidated Statements of Stockholders' Equity.

  Other investments in which the Company's interest is less than 20% and which
are not classified as available-for-sale securities are carried at the lower
of cost or net realizable value unless it is determined that the Company
exercises significant influence over the investee company, in which case the
equity method of accounting is used. For those investments in affiliates in
which the Company's voting interest is between 20% and 50%, the equity method
of accounting is generally used. Under this method, the investment balance,
originally recorded at cost, is adjusted to recognize the Company's share of
net earnings or losses of the affiliates as they occur, limited to the extent
of the Company's investment in, advances to and commitments for the investee.
The Company's share of net earnings or losses of affiliates includes the
amortization of the difference between the Company's investment and its share
of the underlying net assets of the investee. Amortization is recorded on a
straight-line basis over periods ranging from three to five years. These
adjustments are reflected in "Equity in losses of affiliates" in the Company's
Consolidated Statements of Operations.

  At the time an equity method investee sells its stock to unrelated parties
at a price in excess of its book value, the Company's net investment in that
affiliate increases. If at that time, the affiliate is not a newly formed,
non-operating entity, nor a research and development, start-up or development
stage company, nor is there question as to the affiliate's ability to continue
in existence, the Company records the increase as a gain in its Consolidated
Statements of Operations.

  The Company assesses the need to record impairment losses on investments and
records such losses when the impairment of an investment is determined to be
other than temporary in nature. These impairment losses are reflected in
"Other gains (losses), net" in the Company's Consolidated Statements of
Operations.

  Accounting for Impairment of Long-Lived Assets

  The Company's management performs on-going business reviews and, based on
quantitative and qualitative measures, assesses the need to record impairment
losses on long-lived assets used in operations when impairment indicators are
present. Where impairment indicators are identified, management determines the
amount of the impairment charge by comparing the carrying value of the long-
lived assets to their fair value. Management determines fair value based on a
combination of the discounted cash flow methodology, which is based upon
converting expected future cash flows to present value, and the market
approach, which includes analysis of market price multiples of companies
engaged in lines of business similar to the company being evaluated. The
market price multiples are selected and applied to the company based on the
relative performance, future prospects and risk profile of the company in
comparison to the guideline companies. Management predominately utilizes
third-party valuation reports in its determination of fair value. The
impairment policy is consistently applied in evaluating impairment for each of
the Company's wholly-owned and majority-owned subsidiaries and investments. It
is reasonably possible that the impairment factors evaluated by management
will change in subsequent periods, given that the Company operates in a
volatile business environment. This could result in material impairment
charges in future periods.

                                      38


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Restructuring Expenses

  The Company assesses the need to record restructuring charges in accordance
with EITF No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)", EITF No. 95-3, "Recognition of Liabilities in Connection
with a Purchase Business Combination" and SAB No. 100, "Restructuring and
Impairment Charges." In accordance with this guidance, management must execute
an exit plan that will result in the incurrence of costs that have no future
economic benefit. Also under the terms of EITF No. 94-3 a liability for the
restructuring charges is recognized in the period management approves the
restructuring plan.

  Property and Equipment

  Property and equipment is stated at cost. Depreciation and amortization is
provided on the straight-line basis over the estimated useful lives of the
respective assets (three to seven years). Leasehold improvements are amortized
on a straight-line basis over the lesser of the estimated useful life of the
asset or the lease term.

  Maintenance and repairs are charged to operating expenses as incurred. Major
renewals and betterments are added to property and equipment accounts at cost.

  Intangible Assets

  Goodwill and other intangible assets are being amortized principally over
periods expected to be benefited, ranging from two to fifteen years, with the
majority of the goodwill balance being amortized over three years.

  Research and Development Costs and Software Costs

  Expenditures that are related to the development of new products and
processes, including significant improvements and refinements to existing
products and the development of software are expensed as incurred, unless they
are required to be capitalized. Software development costs are required to be
capitalized when a product's technological feasibility has been established by
completion of a detailed program design or working model of the product, and
ending when a product is available for general release to customers. To date,
the establishment of technological feasibility and general release has
substantially coincided. As a result, capitalized software development costs
have not been significant. Additionally, at the date of acquisition or
investment, the Company evaluates the components of the purchase price of each
acquisition or investment to identify amounts allocated to in-process research
and development. Upon completion of acquisition accounting and valuation, such
amounts are charged to expense if technological feasibility had not been
reached at the acquisition date.

  Advertising Costs

  Advertising costs are expensed in the year incurred. Advertising expenses
were approximately $51.5 million, $161.7 million and $6.8 million for the
years ended July 31, 2001, 2000 and 1999, respectively.

  Accounting for Income Taxes

  Income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the

                                      39


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

  Earnings (Loss) Per Share

  The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". Basic
earnings per share is computed based on the weighted average number of common
shares outstanding during the period. The dilutive effect of common stock
equivalents and convertible preferred stock are included in the calculation of
diluted earnings per share only when the effect of their inclusion would be
dilutive. Approximately 8.5 million weighted average common stock equivalents
and approximately 9.7 million shares representing the weighted average effect
of assumed conversion of convertible preferred stock were excluded from the
denominator in the diluted loss per share calculation for the year ended July
31, 2001. Approximately 13.1 million weighted average common stock equivalents
and approximately 9.5 million shares representing the weighted average effect
of assumed conversion of convertible preferred stock were excluded from the
denominator in the diluted loss per share calculation for the year ended July
31, 2000.

  If a subsidiary has dilutive stock options or warrants outstanding, diluted
earnings per share is computed by first deducting from net income (loss), the
income attributable to the potential exercise of the dilutive stock options or
warrants of the subsidiary. The effect of income attributable to dilutive
subsidiary stock equivalents was immaterial during the years ended July 31,
2001, 2000 and 1999.

  The reconciliation of the denominators of the basic and diluted earnings
(loss) per share computations for the Company's reported net income (loss) is
as follows:



                                                         Years Ended July 31,
                                                        -----------------------
                                                         2001    2000    1999
                                                        ------- ------- -------
                                                            (in thousands)
                                                               
   Weighted average number of common shares outstand-
    ing--basic......................................... 329,623 261,555 186,532
   Weighted average number of dilutive common stock
    equivalents outstanding............................     --      --   17,810
   Weighted average effect of assumed conversion of
    convertible preferred stock........................     --      --    2,490
                                                        ------- ------- -------
   Weighted average number of common shares outstand-
    ing--diluted....................................... 329,623 261,555 206,832
                                                        ======= ======= =======


  Stock-Based Compensation Plans

  The Company accounts for its stock compensation plans under the provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation." As permitted by
SFAS No. 123, the Company measures compensation cost in accordance with
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees" and related interpretations. Accordingly, no accounting
recognition is given to stock options granted at fair market value until they
are exercised. Upon exercise, net proceeds, including tax benefits realized,
are credited to equity.

                                      40


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Use of Estimates

  The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

  Diversification of Risk

  Sales to one customer, Cisco Systems, Inc., accounted for 8%, 11% and 34% of
consolidated net revenue and 14%, 28% and 43% of eBusiness and Fulfillment
segment net revenue for fiscal years 2001, 2000 and 1999, respectively.
Accounts receivable from this customer amounted to approximately 9% and 2% of
total trade accounts receivable at July 31, 2001 and 2000, respectively.
Customer advertising contracts serviced by DoubleClick, Inc. accounted for
approximately 1% and 13% of consolidated net revenue and 7% and 47% of Search
and Portals segment net revenue for fiscal years 2001 and 2000, respectively.
The Company's products and services are provided to customers primarily in
North America.

  Financial instruments, which potentially subject the Company to
concentrations of credit risk, are cash equivalents, available-for-sale
securities, and accounts receivable. The Company's cash equivalent investment
portfolio is diversified and consists primarily of short-term investment grade
securities. To reduce risk, the Company performs ongoing credit evaluations of
its customers' financial conditions and generally does not require collateral
on accounts receivable.

  The Company enters into interest rate swap and cap agreements to reduce the
impact of changes in interest rates on its floating rate debt. The swap
agreements are contracts to exchange floating rate for fixed interest payments
periodically over the life of the agreements without the exchange of the
underlying notional amounts. The notional amounts of interest rate agreements
are used to measure interest to be paid or received and do not represent the
amount of exposure to credit loss. The differential paid or received on
interest rate agreements is recognized as an adjustment to interest expense.

  Derivative Instruments and Hedging Activities

  As amended, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS No. 133 requires that all
derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statements of operations or as a component of comprehensive income, depending
on the type of hedging relationship that exists. If the derivative is
determined to be a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives are offset against the change in fair value of the
hedged assets, liabilities, or firm commitments through the statements of
operations or recognized in other comprehensive income until the hedged item
is recognized in the statements of operations. The ineffective portion of a
derivative's change in fair value is immediately recognized in earnings. The
Company currently holds derivative instruments and engages in certain hedging
activities, which have been accounted for as described in Note 14. The Company
adopted SFAS No. 133 on August 1, 2000 and recorded a transition gain, net of
tax, of approximately $3.2 million during the first quarter of fiscal year
2001.


                                      41


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  Comprehensive Income

  SFAS No. 130, "Reporting Comprehensive Income," requires certain financial
statement components, such as net unrealized holding gains or losses and
cumulative translation adjustments to be included in other comprehensive
income (loss). The Company reports comprehensive income (loss) in the
Consolidated Statements of Stockholders' Equity.

  Recent Accounting Pronouncements

  In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 will apply
to all business combinations that the Company enters into after June 30, 2001,
and eliminates the pooling-of-interests method of accounting. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. Under the new
Statements, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.

  The Company is required to adopt these Statements for accounting for
goodwill and other intangible assets beginning in the first quarter of fiscal
year 2003. Application of the non-amortization provisions of the Statement is
indeterminable at July 31, 2001 as the Company intends to continue to perform
an impairment analysis of the remaining goodwill and other intangible assets
through the end of fiscal year 2002. Upon adoption on August 1, 2002, the
Company will perform the required impairment tests of goodwill and indefinite
lived intangible assets and has not yet determined what effect these tests
will be on the earnings and financial position of the Company.

(3)Segment Information

  Based on the information provided to the Company's chief operating decision
maker for purposes of making decisions about allocating resources and
assessing performance, the Company's continuing operations have been
classified in five operating segments that are strategic business units
offering distinctive products and services that are marketed through different
channels.

  The five operating segments are: (i) Interactive Marketing, (ii) eBusiness
and Fullfillment, (iii) Search and Portals, (iv) Infrastructure and Enabling
Technologies and (v) Internet Professional Services. The Interactive Marketing
segment companies provide services and solutions for marketers and advertisers
to enhance the effectiveness and efficiency of their online programs. The
eBusiness and Fulfillment segment companies work across the entire eBusiness
value chain to sell and deliver goods from the manufacturer to the customer.
The Search and Portals segment companies provide products and services that
connect Internet, Extranet and Intranet users to information. The
Infrastructure and Enabling Technologies segment companies provide products
and services essential to business operations on the Internet, including
outsourced managed applications, technology platforms for automating digital
imagery and applications designed to improve the performance of systems and
networks. The Company's Internet Professional Services company offers strategy
consulting, creative services and infrastructure development to Global 2000
companies seeking to initiate, enhance or redirect their presence on the
Internet.

  The Company's accounting policies for segments are the same as those
described in note 2 "Summary of Significant Accounting Policies". Management
evaluates segment performance based on segment "recurring operating income
(loss)," which is defined as the operating income (loss) excluding in-process
research and development expenses, depreciation, amortization, and long-lived
asset impairment and restructuring charges.

  In October 2000, CMGion acquired AdForce from the Company. In November 2000,
the Company announced its decision to cease funding the operations of iCAST in
the second quarter of fiscal 2001, but to continue to operate Signatures, a
business previously included in the operations of iCAST, as an independent

                                      42


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CMGI majority-owned subsidiary. As a result of these transactions, the results
of AdForce, which were previously included in the Interactive Marketing
segment, are included in the Infrastructure and Enabling Technologies segment
and the results of Signatures (until the Company sold its majority interest in
February 2001), which were previously included in the Search and Portals
segment, are included in the eBusiness and Fulfillment segment. For
comparative purposes, all prior period segment results and certain other
amounts for prior periods have been reclassified to reflect these transactions
and conform to current period presentation.

  Summarized financial information of the Company's continuing operations by
business segment is as follows:




                                                  Years Ended July 31,
                                            -----------------------------------
                                               2001         2000        1999
                                            -----------  -----------  ---------
                                                     (in thousands)
                                                             
   Net revenue:
     Interactive Marketing................  $   133,449  $   187,348  $  26,830
     eBusiness and Fulfillment............      691,414      345,177    145,094
     Search and Portals...................      182,280      236,778      8,238
     Infrastructure and Enabling Technolo-
      gies................................      136,095       78,620      6,101
     Internet Professional Services.......       94,464       42,498        126
                                            -----------  -----------  ---------
                                            $ 1,237,702  $   890,421  $ 186,389
                                            ===========  ===========  =========
   Operating income (loss):
     Interactive Marketing................  $(1,939,589) $  (489,490) $ (42,478)
     eBusiness and Fulfillment............     (179,375)     (53,769)     5,622
     Search and Portals...................   (1,968,494)  (1,123,963)   (36,684)
     Infrastructure and Enabling Technolo-
      gies................................     (942,126)    (383,913)   (37,743)
     Internet Professional Services.......     (735,607)     (83,520)    (3,230)
     Other................................     (102,770)     (55,152)   (12,146)
                                            -----------  -----------  ---------
                                            $(5,867,961) $(2,189,807) $(126,659)
                                            ===========  ===========  =========
   Recurring operating income (loss):
     Interactive Marketing................  $  (142,767) $  (110,947) $ (26,936)
     eBusiness and Fulfillment............      (16,461)      (4,076)    10,664
     Search and Portals...................     (117,668)    (244,256)   (33,201)
     Infrastructure and Enabling Technolo-
      gies................................     (279,121)    (184,084)   (35,780)
     Internet Professional Services.......        2,842      (11,854)      (855)
     Other................................      (85,858)     (52,554)   (11,821)
                                            -----------  -----------  ---------
                                            $  (639,033) $  (607,771) $ (97,929)
                                            ===========  ===========  =========



                                      43


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




                                                                July 31,
                                                          ---------------------
                                                             2001       2000
                                                          ---------- ----------
                                                             (in thousands)
                                                               
   Total assets:
     Interactive Marketing............................... $  168,801 $1,614,863
     eBusiness and Fulfillment...........................    357,569    508,380
     Search and Portals..................................    171,604  2,115,894
     Infrastructure and Enabling Technologies............    194,073    823,706
     Internet Professional Services......................    124,555    848,332
     Other...............................................  1,072,329  2,645,932
                                                          ---------- ----------
                                                          $2,088,931 $8,557,107
                                                          ========== ==========



  "Other" includes certain cash equivalents, available-for-sale securities,
certain other assets and corporate infrastructure expenses, which are not
identifiable to the operations of the Company's five operating business
segments.

(4)Discontinued Operations

  In May 1999, the Company completed the sale of its subsidiary, CMG Direct to
MSGI. At the time, CMG Direct comprised the Company's entire lists and
database services segment. As a result of the sale of CMG Direct the Company
received total proceeds valued at approximately $91.4 million consisting of
approximately $12.3 million in cash and approximately 2.3 million shares of
MSGI common stock. As a result of the sale, the net gain of $53.2 million
recorded by the Company and the historical operations of the Company's lists
and database services segment have been reflected as income from discontinued
operations in the accompanying consolidated financial statements. Certain
prior period amounts in the consolidated financial statements have been
reclassified in accordance with accounting principles generally accepted in
the United States of America to reflect the Company's previously reported
lists and database services segment as discontinued operations. Summarized
financial information for discontinued operations is as follows:



                                                                    Year ended
                                                                  July 31, 1999
                                                                  --------------
                                                                  (in thousands)
                                                               
     Net revenues................................................    $ 6,998
     Operating expenses..........................................      8,343
                                                                     -------
     Operating loss..............................................     (1,345)
     Gain on sale of CMG Direct..................................     90,444
                                                                     -------
     Income before income taxes..................................     89,099
     Income tax expense..........................................     36,702
                                                                     -------
     Net income from discontinued operations.....................    $52,397
                                                                     =======


(5)Deconsolidation of Lycos, Inc., Vicinity Corporation and Signatures SNI,
Inc.

  As a result of the Company's sale of Lycos shares during January 1999, the
Company's ownership interest in Lycos fell below 20% of Lycos' outstanding
shares. With this decline in ownership below 20%, CMGI began accounting for
its investment in Lycos (net of shares attributable to CMG@Ventures I's profit
members) as available-for-sale securities, carried at fair value.

  Beginning in November 1998, CMGI's ownership interest in Vicinity was
reduced to below 50% as a result of employee stock option exercises. As such,
beginning in November 1998, the Company began to account for

                                      44


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
its investment in Vicinity under the equity method of accounting, rather than
the consolidation method. Prior to these events, the operating results of
Vicinity were consolidated within the operating results of the Company's
Search and Portals segment, and the assets and liabilities of Vicinity were
consolidated with those of CMGI's other majority-owned subsidiaries in the
Company's consolidated balance sheets. The Company's historical quarterly
consolidated operating results for the fiscal quarter ended October 31, 1998
included Vicinity net revenue of approximately $1.5 million and operating
losses of approximately $621,000.

  As a result of Vicinity's initial public offering and subsequent issuances
of its common stock, the Company's ownership interest in Vicinity fell below
20% of Vicinity's outstanding shares. With this decline in ownership below
20%, CMGI began accounting for its investment in Vicinity (net of shares
attributable to CMG@Ventures I's and to CMG@Ventures II's profit members) as
available-for-sale securities, carried at fair value.

  Beginning in February 2001, CMGI's ownership interest in Signatures was
reduced to below 50% as a result of the sale of the Company's majority
interest. As such, beginning in February 2001, the Company began to account
for its investment in Signatures under the equity method of accounting, rather
than the consolidation method. Prior to these events, the operating results of
Signatures were consolidated within the operating results of the Company's
eBusiness and Fulfillment segment, and the assets and liabilities of
Signatures were consolidated with those of CMGI's other majority-owned
subsidiaries in the Company's consolidated balance sheets. The Company's
historical quarterly consolidated operating results for the six months ended
January 31, 2001 included Signatures net revenue of approximately $40.8
million and operating losses of approximately $4.7 million.

(6)Available-for-Sale Securities

  At July 31, 2001 and 2000, available-for-sale securities primarily consist
of stock investments, carried at fair value and based on quoted market prices,
net of a market value discount to reflect any remaining restrictions on
transferability. Available-for-sale securities at July 31, 2001 primarily
consisted of approximately 7.1 million shares of Primedia stock valued at
$43.5 million, 590,000 shares of Yahoo! stock valued at $10.4 million,
4.6 million shares of Vicinity stock valued at $8.0 million, 4.7 million
shares of Divine stock valued at $6.0 million, 2.1 million shares of MSGI
stock valued at $1.9 million and 3.2 million shares of Ventro Corporation
stock valued at $1.6 million. Available-for-sale securities at July 31, 2000
primarily consisted of approximately 12.9 million shares of Lycos stock valued
at $781.6 million, 1.2 million shares of Yahoo! stock valued at $155.8
million, 8.0 million shares of Primedia stock valued at $150.0 million, 3.7
million shares of Kana stock valued at $135.7 million, 1.3 million shares of
Critical Path stock valued at $73.3 million and 1.5 million shares of eBay
stock valued at $69.6 million. The net unrealized holding gain of
approximately $17.7 million and $495.7 million, net of deferred income taxes,
has been presented as "Accumulated other comprehensive income" within the
Consolidated Statements of Stockholders' Equity at July 31, 2001 and 2000,
respectively. Also included in available-for-sale securities at July 31, 2000,
were approximately 1.2 million shares of Lycos stock, which the Company had a
potential obligation to sell to Lycos, at prices ranging from $0.0025 to $2.40
per share, pursuant to employee stock option exercises. A corresponding
liability, carried at market value, of approximately $71.0 million has been
included in other current liabilities as of July 31, 2000.



                                      45


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7)Property and Equipment

  Property and equipment consists of the following:



                                                                  July 31,
                                                              -----------------
                                                                2001     2000
                                                              -------- --------
                                                               (in thousands)
                                                                 
   Machinery and equipment................................... $186,770 $143,677
   Other.....................................................  140,212  174,246
                                                              -------- --------
                                                               326,982  317,923
   Less: Accumulated depreciation and amortization...........  117,428   58,653
                                                              -------- --------
   Net property and equipment................................ $209,554 $259,270
                                                              ======== ========


(8)Business Combinations

  Fiscal 2001

  In August 2000, Engage completed its acquisition of Space. The total
purchase price for Space was valued at approximately $35.8 million consisting
of approximately 3.2 million shares of Engage common stock valued at
approximately $35.5 million and direct acquisition costs of approximately
$425,000, net of cash acquired of $70,000. Engage also recorded approximately
$18.9 million in deferred compensation related to approximately 1.5 million
shares of Engage common stock to be issued to certain employee shareholders of
Space contingent upon continued employment for a one year period following the
date of acquisition. Lastly, contingent consideration, comprised of
approximately 1.4 million shares of Engage common stock, has been placed in
escrow to satisfy certain performance objectives by Space. At July 31, 2001,
the performance goals were not met by Space, and Engage expects the contingent
consideration shares in escrow will be returned during the first quarter of
fiscal year 2002.

  In September 2000, Engage completed its acquisition of MediaBridge. The
total purchase price for MediaBridge was valued at approximately $219.1
million consisting of approximately 11.7 million shares of Engage common stock
valued at approximately $190.1 million, options to purchase Engage common
stock valued at approximately $31.1 million, direct acquisition costs of
approximately $482,000 and net cash acquired of $2.6 million. Of the purchase
price, $700,000 was allocated to in-process research and development, which
was charged to operations during the first quarter of fiscal 2001. Engage also
recorded approximately $7.0 million in deferred compensation related to stock
options issued to certain MediaBridge employees. Approximately twelve percent
of the shares issued are subject to an escrow period of one year to secure
certain indemnification obligations of the former stockholders of MediaBridge.
During fiscal year 2001, Engage recorded a $2.9 million adjustment to the
goodwill that was originally recorded for the MediaBridge acquisition. The
adjustment related principally to accruing additional liabilities related to
MediaBridge pre-acquisition contingencies. The additional goodwill recorded
will be amortized over the remaining life of the goodwill amortization periods
as originally determined for the MediaBridge acquisition. In the fourth
quarter of 2001, an impairment charge in the amount of approximately $109.0
million was recorded to write-down MediaBridge goodwill and other intangible
assets to fair value (see note 9).

  The acquisitions completed during fiscal years 2001, 2000 and 1999 have been
accounted for using the purchase method and, accordingly, the purchase prices
have been allocated to the assets purchased and liabilities assumed based upon
their fair values at the dates of acquisition. The amounts of the purchase
prices allocated to goodwill and other identifiable intangible assets are
being amortized on a straight-line basis, generally over three years. The
acquired companies are included in the Company's consolidated financial
statements from the respective dates of acquisition.


                                      46


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  Fiscal 2000

  In August 1999, CMGI completed its acquisition of approximately 81.5% of
AltaVista, for approximately 38.0 million CMGI common shares valued at
approximately $1.8 billion, approximately 18,000 shares of the Company's
Series D preferred stock, which were converted into approximately 3.7 million
shares of CMGI common stock in October 1999 valued at approximately $173.0
million, two three-year notes totaling $220.0 million and the exchange of CMGI
and subsidiary stock options for AltaVista stock options. The AltaVista
acquisition included the assets and liabilities constituting the AltaVista
Internet search service and also included former Compaq subsidiaries Zip2
Corporation and Shopping.com. The shares issued by the Company in connection
with the AltaVista acquisition are not registered under the Securities Act of
1933. The total purchase price for AltaVista was valued at approximately $2.4
billion, including costs of acquisition of approximately $4.0 million. The
value of the Company's shares included in the purchase price was recorded net
of a weighted average 10% market value discount to reflect the restrictions on
transferability.

  In January 2000, CMGI completed its acquisition of AdForce. The total
purchase price for AdForce was valued at approximately $545.0 million. Of the
purchase price, approximately $9.3 million was allocated to in-process
research and development, which was charged to operations during the third
quarter of fiscal 2000. Also in January 2000, CMGI completed its acquisition
of Flycast. The total purchase price for Flycast was valued at approximately
$897.5 million. Of the purchase price, approximately $29.3 million was
allocated to in-process research and development, which was charged to
operations during the third quarter of fiscal year 2000. In March 2000, CMGI
completed its acquisition of Yesmail. The total purchase price for Yesmail was
valued at approximately $588.6 million. Of the purchase price, approximately
$18.5 million was allocated to in-process research and development, which was
charged to operations during the fourth quarter of fiscal year 2000. In
April 2000, CMGI completed its acquisition of uBid. The total purchase price
for uBid was valued at approximately $390.8 million. Also in April 2000, CMGI
completed its acquisition of approximately 94.2% of Tallan. The total purchase
price for Tallan was valued at approximately $905.2 million. The consideration
for the acquisitions of AdForce, Flycast, Yesmail and uBid was primarily in
the form of CMGI common stock.

  In April 2000, CMGI contributed Flycast and Adsmart to Engage, a majority-
owned subsidiary of CMGI. Upon completion of the transaction, CMGI received
approximately 64 million shares of Engage common stock, and Flycast and
Adsmart became wholly owned subsidiaries of Engage. As a result of the
transaction, CMGI's ownership interest in Engage increased to approximately
87% and CMGI recorded a decrease to its consolidated stockholders' equity of
approximately $54.0 million to reflect this transaction.

  During fiscal year 2000, the Company, or its subsidiaries, also completed
the acquisitions of eighteen other companies for combined consideration of
approximately $586.1 million in CMGI and subsidiary common stock, options and
warrants to purchase common stock of CMGI and subsidiaries, notes which are
payable only in CMGI common stock and cash and commitments to fund a total of
approximately $83.0 million in operating capital. Those acquisitions included
1stUp ($35.9 million purchase price), Activate ($61.6 million), AdKnowledge
($164.1 million), AdTECH Advertising Service Providing GmbH (in which the
Company acquired an 80.29% ownership interest) ($20.2 million), Clara Vista
Corporation ($17.2 million), ClickHear, Inc. ($50,000), Equilibrium ($17.1
million), ExchangePath ($12.5 million), GreenWitch, LLC ($3.0 million),
iAtlas, Inc. ($23.3 million), Interactive Solutions ($5.0 million), Raging
Bull, a CMGI affiliate ($165.8 million), Shortbuzz ($330,000), Signatures
($30.0 million), Transium Corporation ($9.6 million), Tribal Voice
($13.8 million), Virtual BillBoard Network ($4.7 million), and the remaining
33% minority interest in Netwright, LLC (Netwright) ($2.0 million) not already
owned by CMGI. In the first step of the AdKnowledge transaction, CMGI acquired
an 88% equity stake in AdKnowledge. The second step of the AdKnowledge
transaction, the contribution of AdKnowledge shares held by AdKnowledge
shareholders, including CMGI, to Engage in

                                      47


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
exchange for approximately 10.3 million shares of Engage common stock, closed
in December 1999. Upon completion of the transaction, CMGI received
approximately 9.8 million shares of Engage, and AdKnowledge became a wholly-
owned subsidiary of Engage.

  Fiscal 1999

  During the third fiscal quarter of 1999, CMGI exercised its right to invest
an additional $22 million in cash to increase its ownership in Magnitude
Network, Inc. (Magnitude Network) from 23% to 92%. CMGI had previously
invested total cash of $2.5 million in Magnitude Network in June and October
1998. Accordingly, beginning in February 1999, CMGI began accounting for its
investment in Magnitude Network under the consolidation method of accounting,
rather than the equity method. CMGI's ownership interest in Magnitude Network
was contributed to CMGI's subsidiary, iCAST, during fiscal 2000.

  In March 1999, CMGI completed the acquisition of 2CAN Media, Inc. (2CAN) for
initial consideration of approximately $27.5 million. Immediately following
the completion of the acquisition, 2CAN was merged with and into CMGI's
subsidiary, Adsmart. As the primary component of the initial consideration
paid for 2CAN, CMGI and Adsmart jointly issued convertible promissory notes in
the aggregate principal amount of approximately $27.0 million. Pursuant to the
conversion terms of the notes, approximately $26.7 million of the convertible
notes have been converted as of July 31, 2001. Additionally, the initial
consideration was subject to increase if Adsmart and 2CAN achieved certain
revenue targets. During the second quarter of fiscal 2000, CMGI recorded
additional purchase consideration of approximately $5.2 million as a result of
contingent consideration performance goals having been met by Adsmart and
2CAN. The additional consideration was paid in shares of CMGI common stock and
cash.

  In April 1999, the Company's subsidiary, Engage, acquired Internet Profiles
Corporation (I/PRO), which provides Web site traffic measurement and audit
services, for approximately $32.7 million including acquisition costs of
$244,000. Of the purchase price, $4.5 million was allocated to in-process
research and development that was charged to operations during fiscal 1999.

  Also during fiscal 1999, the Company, or its subsidiaries, completed the
acquisitions of four other companies for purchase prices valued at a combined
total of approximately $19.8 million including acquisition costs of $300,000.
Those acquisitions were Activerse, Inc. ($14.1 million purchase price),
Nascent ($4.9 million), Netwright (66% ownership in exchange for $5.0 million
in future funding commitments) and Digiband, Inc. ($845,000).


                                      48


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  The purchase prices for the fiscal year 2001, 2000 and 1999 acquisitions
were allocated as follows:



                                                    Years ended July 31,
                                                -----------------------------
                                                  2001       2000      1999
                                                --------  ---------- --------
                                                       (in thousands)
                                                            
   Working capital, including cash (cash over-
    draft) acquired............................ $(11,219) $  115,810 $ (6,859)
   Property and equipment......................    2,468      89,834    2,388
   Other assets (liabilities), net.............     (404)     54,753     (646)
   Goodwill....................................  239,028   5,532,078  103,808
   Developed technology........................      --      220,418    3,000
   Other identifiable intangible assets........   24,300     224,615    1,920
   In-process research and development.........      700      64,437    6,061
   Minority interest...........................      --          --      (119)
   Losses recorded under equity method.........      --          --       388
                                                --------  ---------- --------
   Purchase price.............................. $254,873  $6,301,945 $109,941
                                                ========  ========== ========


  Amortization of intangible assets and stock-based compensation consists of
the following:




                                                       Years ended July 31,
                                                   -----------------------------
                                                      2001       2000     1999
                                                   ---------- ---------- -------
                                                          (in thousands)
                                                                
   Amortization of intangible assets.............. $1,488,822 $1,317,795 $14,672
   Amortization of stock-based compensation.......     69,342     84,880   1,455
                                                   ---------- ---------- -------
   Total.......................................... $1,558,164 $1,402,675 $16,127
                                                   ========== ========== =======



  The amortization of intangible assets and impairment of long-lived assets
for the years ended July 31, 2001, 2000 and 1999 would have been primarily
allocated to general and administrative expense had the Company recorded the
expenses within the functional operating expense categories. The amortization
of stock-based compensation for the years ended July 31, 2001, 2000 and 1999
would have been primarily allocated to general and administrative expense had
the Company recorded the expenses within the functional department of the
employee or director.

  The following unaudited pro forma financial information presents the
consolidated operations of the Company as if the fiscal year 2000 acquisitions
of AltaVista, AdForce, Flycast, Yesmail, Tallan, and uBid had occurred as of
the beginning of fiscal 2000 after giving effect to certain adjustments
including increased amortization of goodwill and other intangible assets
related to the acquisitions and increased interest expense related to long-
term debt issued in conjunction with the acquisitions. In-process research and
development charges totaling $57.1 million which were recorded in fiscal 2000
related to the acquisitions of AdForce, Flycast and Yesmail in fiscal 2000 are
excluded from the pro forma results as they are non-recurring and not
indicative of normal operating results. The unaudited pro forma information
excludes the impact of all other fiscal year 2000 acquisitions and the fiscal
year 2001 acquisitions since they are not material to the Company's
consolidated financial statements.

                                      49


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  The following unaudited pro forma financial information is provided for
informational purposes only and should not be construed to be indicative of
the Company's consolidated results of operations had the acquisitions been
consummated on the dates assumed and do not project the Company's results of
operations for any future period:



                                                       Years ended July 31,
                                                      ------------------------
                                                         2000         1999
                                                      -----------  -----------
                                                       (in thousands, except
                                                          per share data)
                                                             
   Net revenue....................................... $ 1,228,633  $   481,290
   Net loss.......................................... $(1,918,717) $(1,179,750)
   Net loss per share (basic and diluted)............ $     (6.68) $     (4.51)


(9)Impairment of Long-Lived Assets

  The Company's management performs on-going business reviews and, based on
quantitative and qualitative measures, assesses the need to record impairment
losses on long-lived assets used in operations when impairment indicators are
present. Where impairment indicators were identified, management determined
the amount of the impairment charge by comparing the carrying value of
goodwill and certain other intangible assets to their fair value. Management
determines fair value based on a combination of the discounted cash flow
methodology, which is based upon converting expected future cash flows to
present value, and the market approach, which includes analysis of market
price multiples of companies engaged in lines of business similar to the
company being evaluated. The market price multiples are selected and applied
to the company based on the relative performance, future prospects and risk
profile of the company in comparison to the guideline companies. Management
predominately utilizes third-party valuation reports in its determination of
fair value. As a result, during management's quarterly review of the value and
periods of amortization of both goodwill and other intangible assets, it was
determined that the carrying value of goodwill and certain other intangible
assets were not fully recoverable.

  During the first quarter of fiscal 2001, the Company recorded an impairment
charge of approximately $69.6 million. Subsequent to October 31, 2000, CMGI
announced its decisions to exit the businesses conducted by its subsidiaries
iCAST and 1stUp. In connection with these decisions, management determined
that the carrying value of certain intangible assets, principally goodwill,
were permanently impaired and recorded impairment charges of approximately
$3.6 million and $23.3 million related to iCAST and 1stUp, respectively. The
Company also recorded other impairment charges during the first quarter of
fiscal 2001 totaling approximately $42.7 million, consisting primarily of
$16.8 million related to intangible assets of Engage, $8.9 million related to
intangible assets of MyWay, and $10.1 million related to intangible assets of
CMGion.

  During the second quarter of fiscal 2001, the Company recorded impairment
charges totaling approximately $2.00 billion. Each of the companies for which
impairment charges were recorded in the second quarter had experienced
declines in operating and financial metrics over the previous several quarters
in comparison to the metrics forecasted at the time of their respective
acquisitions. The impairment analysis considered that these companies were
recently acquired during the time period from August 1999 to March 2000 and
that the intangible assets recorded upon acquisition of these companies were
generally being amortized over a three-year useful life. Sufficient monitoring
was performed over the course of the prior several quarters and this
monitoring process culminated with impairment charges for these companies in
the second quarter. The amount of the impairment charge was determined by
comparing the carrying value of goodwill and certain other intangible assets
to fair value at January 31, 2001. The discount rates used as of January 31,
2001 ranged from 20% to 25%. These discount rates were determined by an
analysis of the risks associated with certain goodwill and other intangible
assets. The resulting net cash flows to which the discount rates were applied
were based on management's estimates of revenues, operating expenses and
income taxes from the assets with identified impairment indicators.


                                      50


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  As a result of sequential declines in operating results, primarily due to
the continued weak overall demand for on-line advertising and marketing
services and changes in business strategies, management determined that the
carrying value of goodwill and certain other intangible assets of Engage,
Yesmail, CMGion's subsidiary, AdForce, and AltaVista should be adjusted.
Accordingly, the Company recorded an impairment charge of approximately $524.1
million, $350.6 million, $241.8 million and $862.6 million, respectively,
totaling $1.98 billion during the second quarter of fiscal 2001 to adjust the
carrying value of these intangible assets.


  Also during the second quarter of fiscal 2001, CMGI announced its decision
to cease funding of ExchangePath. In connection with this decision, management
determined that the carrying value of certain intangible assets of
ExchangePath, principally goodwill, were permanently impaired and recorded
impairment charges in the quarter ended January 31, 2001 of approximately $5.7
million. The Company also recorded other impairment charges during the second
quarter of fiscal 2001 totaling approximately $13.8 million primarily related
to certain intangible assets of Tallan.

  During the third quarter of fiscal 2001, the Company recorded impairment
charges totaling approximately $609.5 million. As a result of a decline in
operating and financial metrics at Tallan over the past few quarters in
comparison to the metrics forecasted at the time of acquisition, management
determined that the carrying value of certain intangible assets, principally
goodwill, were permanently impaired and recorded impairment charges of $497.0
million during the third quarter of fiscal year 2001. In addition, CMGI
announced its decision to explore strategic alternatives for the businesses
conducted by its subsidiary, Activate, and AdForce, a subsidiary of CMGion. In
connection with these decisions, management determined that the carrying value
of certain intangible assets, principally goodwill, were permanently impaired
and recorded impairment charges of approximately $30.4 million and $81.4
million related to Activate and AdForce, respectively, during the third
quarter of fiscal year 2001.

  During the fourth quarter of fiscal year 2001, the Company recorded
impairment charges totaling approximately $685.3 million. Due to continued
decline in operating and financial metrics, management determined that the
carrying value of goodwill and other intangible assets exceeded their
estimated fair value. Accordingly, the Company recorded impairment charges of
approximately $384.4 million, $127.3 million, $92.2 million, $75.5 million,
$4.2 million and $3.6 million related to Engage, AltaVista, MyWay, Tallan,
Yesmail and uBid, respectively, to adjust the carrying value of the goodwill
and intangible balances.


  The Company had recorded impairment charges totaling approximately $34.2
million during fiscal 2000. The significant components of this balance include
an impairment charge of approximately $13.3 million related to the closing of
operations at Activerse, Inc. and a net impairment charge of approximately
$11.8 million related to the sale of substantially all of the assets of
Magnitude Network.

  The impairment factors evaluated by management may change in subsequent
periods, given that the Company operates in a volatile business environment.
This could result in additional material impairment charges in future periods.

(10)Restructuring Charges

  During the fiscal year ended July 31, 2001, the Company recorded
restructuring charges of approximately $217.2 million in accordance with EITF
No. 94-3, EITF No. 95-3 and SAB No. 100. The Company's restructuring
initiatives involved strategic decisions to exit certain businesses or to re-
evaluate the current state of on-going businesses. The restructuring charges
recorded during the first, second, third and fourth quarters of fiscal 2001
(Q1 Restructuring, Q2 Restructuring, Q3 Restructuring and Q4 Restructuring,
respectively) primarily relate to contract terminations, severance charges and
equipment charges resulting from the closing of operations at iCAST, 1stUp,
ExchangePath and AdForce and the Company's decision to cease funding the
operations at NaviPath and to streamline its remaining operations in
connection with cost reduction initiatives. Severance

                                      51


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
charges include employee termination costs as a result of a reduction in
workforce of approximately 1,700 positions and salary expense for certain
employees involved in the restructuring efforts. Engage and AltaVista, who
eliminated approximately 550 and 410 positions, respectively, incurred the
majority of these severance charges. Employees affected by the restructuring
were notified both through direct personal contact and by written
notification. The contract terminations primarily consisted of costs to exit
facility and equipment leases and to terminate bandwidth and other vendor
contracts. The majority of the contract terminations were incurred by Engage
in connection with the closing of several office locations, by CMGion's
subsidiary, AdForce, and by NaviPath in connection with the termination of
bandwidth agreements, by MyWay due to the termination of a contract with a
significant customer and by AltaVista in connection with the termination of a
contract with a significant customer, the termination of an office lease
commitment and the termination of other contracts due to a change in its
business strategy. The asset impairment charges primarily relate to the write-
off of property and equipment by Engage, 1stUp, ExchangePath and NaviPath.

  During the third quarter of fiscal 2001, the Company settled certain
employee related expenses and contractual obligations for amounts greater than
originally anticipated. As a result, the Company recorded a restructuring
adjustment of approximately $3.8 million to the Q2 Restructuring, primarily
related to an additional payment made by AltaVista to a third party to
terminate a service contract.

  The restructuring charges incurred during fiscal year 2000 primarily
consisted of a $12.3 million charge incurred by AltaVista related to the
renegotiation of a contract with a significant customer.

  The following table summarizes the activity in the accrued restructuring
accounts from July 31, 2000 to July 31, 2001:



                                     Employee
                                     Related   Contractual    Asset
                                     Expenses  Obligations Impairments  Total
                                     --------  ----------- ----------- --------
                                                  (in thousands)
                                                           
   Beginning balance at July 31,
    2000...........................  $    157   $ 13,526    $    --    $ 13,683
   Q1 Restructuring................     4,667      3,678         496      8,841
   Q2 Restructuring................    13,282     67,121      19,628    100,031
   Q3 Restructuring................     1,732     10,173       2,805     14,710
   Restructuring adjustments.......        92      1,293       2,431      3,816
   Q4 Restructuring................     7,728     63,788      18,305     89,821
   Cash charges....................   (23,490)   (47,301)        924    (69,867)
   Non-cash charges................       --     (25,635)    (39,848)   (65,483)
                                     --------   --------    --------   --------
   Accrued restructuring balance at
    July 31, 2001..................  $  4,168   $ 86,643    $  4,741   $ 95,552
                                     ========   ========    ========   ========


  The Company anticipates that the remaining restructuring charges will be
settled by February 2003. The payments of employee related expenses are
substantially complete. The remaining contractual obligation payments are
primarily related to lease obligations.


                                      52


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  The restructuring charges for the fiscal years ended July 31, 2001 and 2000
would have been allocated as follows had the Company recorded the expense
within the functional department of the restructured activities:



                                                               Years ended July
                                                                     31,
                                                               ----------------
                                                                 2001    2000
                                                               -------- -------
                                                                (in thousands)
                                                                  
   Cost of revenue............................................ $103,633 $ 2,071
   Research and development...................................   17,128      44
   Selling....................................................   31,617  12,304
   General and administrative.................................   64,841     351
                                                               -------- -------
                                                               $217,219 $14,770
                                                               ======== =======


(11)CMGI@Ventures Investments

  The Company's first Internet venture fund, CMG@Ventures I was formed in
February 1996. The Company owns 100% of the capital and is entitled to
approximately 77.5% of the cumulative net profits of CMG@Ventures I. The
Company completed its $35 million commitment to this fund during fiscal year
1997. The Company's second Internet venture fund, CMG@Ventures II, was formed
during fiscal year 1997. The Company owns 100% of the capital and is entitled
to 80% of cumulative net profits of CMG@Ventures II. The remaining interest in
these investments are attributed to profit members, including the Chief
Executive Officer of the Company. The Company is responsible for all operating
expenses of CMG@Ventures I and CMG@Ventures II. CMG@Ventures II invested a
total of approximately $26.4 million in nine companies during fiscal year
1999, approximately $7.3 million in four companies during fiscal year 2000 and
approximately $1.8 million in two companies during fiscal year 2001.

  In fiscal year 1999, CMGI formed the @Ventures III venture capital fund
(@Ventures III Fund). The @Ventures III Fund secured capital commitments from
outside investors, and CMGI, to be invested in emerging Internet service and
technology companies. 78.1% of amounts committed to the @Ventures III Fund are
provided through two entities, @Ventures III, L.P. and @Ventures Foreign Fund
III, L.P. CMGI does not have a direct ownership interest in either of these
entities, but CMGI is entitled to approximately 2% of the cumulative net
capital gains realized by both entities. Management of these entities is the
responsibility of @Ventures Partners III, LLC (@Ventures Partners, III), which
is entitled to 20% of their net gains. The Company has committed to contribute
up to $56 million to its limited liability company subsidiary, CMG@Ventures
III, equal to 19.9% of total amounts committed to the @Ventures III Fund, of
which approximately $53.1 million has been funded as of July 31, 2001.
CMG@Ventures III co-invests with the @Ventures III Fund in all portfolio
companies. CMGI owns 100% of the capital and is entitled to approximately 80%
of the cumulative net capital gains realized by CMG@Ventures III. @Ventures
Partners III is entitled to the remaining 20% of the cumulative net capital
gains realized by CMG@Ventures III. The remaining 2% committed to the
@Ventures III Fund is provided by a fourth entity, @Ventures Investors, LLC
(@Ventures Investors), in which CMGI has no ownership. The Company's Chief
Executive Officer has an individual ownership interest in @Ventures Investors
and, as a member of @Ventures Partners III, is entitled to a portion of net
gains distributed to @Ventures Partners III. CMG@Ventures III invested a total
of approximately $20.3 million in 23 companies during fiscal year 1999,
approximately $29.7 million in 25 companies during fiscal year 2000 and
approximately $300,000 in one company during fiscal 2001.

  During fiscal year 2000, CMGI formed an expansion fund to the @Ventures III
Fund to provide follow-on financing to existing @Venture III Fund investee
companies pursuant to which CMGI's commitment increased by $38.2 million
through its limited liability company subsidiary CMG@Ventures Expansion.
CMG@Ventures Expansion has a structure that is substantially identical to the
@Ventures III Fund, and CMGI's interests in said fund are comparable to its
interests in the @Ventures III Fund. CMG@Ventures Expansion invested a total
of

                                      53


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately $9.3 million in 14 companies during fiscal year 2000 and
approximately $4.3 million in nine companies in fiscal year 2001.

  Also during fiscal year 2000, CMGI announced the formation of three new
venture capital funds: CMGI@Ventures IV, the B2B Fund and the Tech Fund. CMGI
owns 100% of the capital and is entitled to a percentage (ranging from
approximately 80% to approximately 92.5%) of the net capital gains realized by
CMGI@Ventures IV, the B2B Fund and the Tech Fund. During fiscal year 2000,
CMGI@Ventures IV, the B2B Fund, and the Tech Fund invested approximately $28.9
million, $155.0 million and $37.3 million in three, eleven and six companies,
respectively. During fiscal year 2001, CMGI @Ventures IV, the B2B Fund and the
Tech Fund were merged into a single evergreen fund called CMGI@Ventures IV
LLC. During fiscal year 2001, CMGI@Ventures IV LLC invested $43.7 million in
nine companies.

(12)Gains on Issuance of Stock by Subsidiaries and Affiliates

  The following schedule reflects the components of "Gains on issuance of
stock by subsidiaries and affiliates":



                                                        Years ended July 31,
                                                      -------------------------
                                                        2001    2000     1999
                                                      -------- ------- --------
                                                           (in thousands)
                                                              
   Gain on stock issuance by NaviSite................ $    198 $51,279 $    --
   Gain on stock issuance by Vicinity................      695  20,903      --
   Gain on stock issuance by Engage..................  120,901   8,205   81,103
   Gain on stock issuance by GeoCities...............      --      --    29,373
   Gain on stock issuance by Lycos...................      --      --    20,253
                                                      -------- ------- --------
                                                      $121,794 $80,387 $130,729
                                                      ======== ======= ========


  For the fiscal year ended July 31, 2001, gain on issuance of stock by Engage
primarily related to the issuance of approximately 14.9 million shares of
common stock by Engage valued at approximately $225.6 million in its
acquisitions of Space and MediaBridge. The Company's ownership interest in
Engage decreased from approximately 86% to approximately 78% primarily as a
result of these stock issuances. The Company provided for deferred income
taxes resulting from the gains on issuance of stock by Engage.

  For the fiscal year ended July 31, 2000, gain on issuance of stock by
NaviSite related primarily to the issuance of approximately 12.8 million
shares of NaviSite's common stock in its initial public offering at a price of
$7 per share, raising approximately $80.4 million in net proceeds for
NaviSite. The Company recorded a pre-tax gain of approximately $51.9 million
as a result of the initial public offering. As a result, the Company's
ownership interest in NaviSite was reduced from approximately 89% to
approximately 69%. The Company provided for deferred income taxes resulting
from the gain on issuance of stock by NaviSite.

  Also during the fiscal year ended July 31, 2000, the Company's affiliate,
Vicinity, completed its initial public offering of common stock, issuing
approximately 8.0 million shares at a price of $17 per share, raising
approximately $126.1 million in net proceeds for Vicinity. As a result of the
initial public offering, the Company's ownership interest in Vicinity was
reduced from approximately 29% to approximately 21%. The Company recorded a
pre-tax gain of approximately $20.9 million as a result of this initial public
offering. The gain was recorded net of the interests attributable to
CMG@Ventures I's and CMG@Ventures II's profit members. The Company provided
for deferred income taxes resulting from the gain on issuance of stock
by Vicinity.

                                      54


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Also during the fiscal year ended July 31, 2000, gain on issuance of stock
by Engage, related primarily to the issuance of approximately 1.7 million
shares of its common stock to Compaq at a price of $15 per share, raising
approximately $24.2 million in net proceeds for Engage. The Company recorded a
pre-tax gain of approximately $12.6 million as a result of the issuance of
stock by Engage to Compaq. The Company's ownership interest in Engage remained
approximately 87% as a result of the Compaq transaction. The Company provided
for deferred income taxes resulting from the gain on issuance of stock by
Engage.

  During the fiscal year ended July 31, 1999, the gain on issuance of stock by
Engage related primarily to the issuance by Engage of approximately 15.6
million shares of its common stock in its initial public offering ($7.50 per
share) and in a private placement of its common stock ($6.98 per share).
Engage received net proceeds totaling approximately $108.0 million from these
stock issuances and the Company's ownership in Engage was reduced from
approximately 96% to 79%. The Company provided for deferred income taxes
resulting from the gain on issuance of stock by Engage.

  Also during the fiscal year 1999, the Company's affiliate, GeoCities,
completed its initial public offering of common stock, issuing approximately
5.5 million shares at a price of $17 per share, which raised approximately
$84.5 million in net proceeds for GeoCities. As a result of the initial public
offering, the Company's ownership interest in GeoCities was reduced from
approximately 34% to 28%. The Company recorded a pre-tax gain of approximately
$24.1 million related to the issuance of stock by GeoCities in its initial
public offering. The Company also recorded net pre-tax gains totaling
approximately $5.3 million related to other issuances of stock by GeoCities
during fiscal year 1999 which included stock issued by GeoCities in its
acquisition of Starseed, Inc. (known as WebRing) and Futuretouch.

  The gain on issuance of stock by Lycos in fiscal year 1999 was primarily
related to the issuance of approximately 4.1 million shares by Lycos, valued
at approximately $158.0 million during August 1998 in its acquisition of
WhoWhere? Inc. With this transaction, the Company's ownership interest in
Lycos was reduced from approximately 24% to 22%.

(13)Other Gains (Losses), Net

  The following schedule reflects the components of "Other gains (losses),
net":




                                                      Years ended July 31,
                                                  ------------------------------
                                                    2001       2000       1999
                                                  ---------  ---------  --------
                                                         (in thousands)
                                                               
   Gain on sale of marketable securities, net.... $ 336,978  $ 505,965  $ 45,475
   Loss on impairment of marketable securities...  (498,313)   (35,000)      --
   Loss on impairment of @Ventures investments...  (145,733)    (3,332)      --
   Loss on sale of Raging Bull, Inc..............   (95,896)       --        --
   Loss on sale of Signatures SNI, Inc...........   (18,499)       --        --
   Gain on sale of real estate holding...........    19,801        --        --
   Gain on sale of @Ventures investments.........       --      53,641   703,386
   Other.........................................   (11,435)     3,991     9,451
                                                  ---------  ---------  --------
                                                  $(413,097) $ 525,265  $758,312
                                                  =========  =========  ========



  During fiscal year 2001, the Company sold marketable securities for total
proceeds of approximately $973.7 million and recorded a net pre-tax gain of
approximately $337.0 million on these sales. These sales primarily consisted
of approximately 8.4 million shares of Lycos stock for proceeds of
approximately $394.7 million, approximately 241.0 million shares of PCCW stock
for proceeds of approximately $190.2 million,

                                      55


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximately 3.7 million shares of Kana stock for proceeds of
approximately $137.6 million, approximately 6.8 million shares of Terra
Networks stock for proceeds of approximately $78.3 million and approximately
1.3 million shares of Critical Path stock for proceeds of approximately $72.8
million.

  During the fiscal year ended July 31, 2001, the Company recorded impairment
charges related to its available-for-sale securities and other marketable
securities. These charges primarily consisted of approximately $187.5 million,
$145.7 million, $49.3 million, $40.5 million, $29.6 million and $25.4 million
of impairment charges related to the Company's holdings of shares of PCCW,
Primedia, Hollywood Entertainment, MSGI, Netcentives and Divine, respectively.

  During the fiscal year ended July 31, 2001, AltaVista, a majority-owned
subsidiary of the Company, sold its subsidiary, Raging Bull, and recorded a
net pre-tax loss of approximately $95.9 million. Also during fiscal year 2001,
AltaVista recorded a pre-tax gain of approximately $19.8 million on the sale
of a real estate holding.

  During the fiscal year ended July 31, 2001 the Company also completed the
sale of a majority interest in Signatures. As a result of the sale, the
Company recorded a loss of approximately $18.5 million and retained a minority
interest in Signatures. The Company accounts for its remaining investment
under the equity method of accounting.

  During the fiscal year ended July 31, 2001, the Company recorded an
impairment charge of approximately $145.7 million for other than temporary
declines in the carrying value of certain investments in affiliates. These
charges were primarily associated with investments made by CMGI@Ventures IV.

  During fiscal year 2000, the Company sold approximately 9.1 million shares
of Yahoo! stock on the open market for proceeds of approximately $1.1 billion
and recorded a pre-tax gain of approximately $499.5 million on these sales. In
addition, the Company recorded a pre-tax gain of approximately $53.6 million
on the sale of its investment in Half.com to eBay and a pre-tax loss of
approximately $35.0 million on the write-down of the carrying value of an
available-for-sale security. The Company's subsidiary, CMGI@Ventures IV
converted its holdings in Half.com into approximately 1.5 million shares of
eBay stock valued at a total of approximately $61.2 million. This gain was
recorded net of the 20% interest attributable to CMGI@Ventures IV's profit
members.

  During fiscal year 1999, the Company recorded a pre-tax gain of
approximately $661.2 million on the sale of its investment in GeoCities to
Yahoo!. The Company's subsidiaries, CMG@Ventures I and CMG@Ventures II
converted their holdings in GeoCities into approximately 5.6 million shares
and 341,000 shares of Yahoo! stock, respectively, valued at a total of
approximately $878.7 million. The gain was recorded net of the interest
attributable to CMG@Ventures I's and II's profit members. In addition, the
Company recorded a pre-tax gain of approximately $19.1 million on the sale of
CMG@Ventures II's investment in Sage Enterprises, Inc. CMG@Ventures II
converted its holdings in Sage Enterprises, Inc. into approximately 226,000
shares of Amazon stock, valued at approximately $26.5 million, as part of a
merger wherein Amazon acquired Sage Enterprises, Inc. This gain was recorded
net of the 20% interest attributable to CMG@Ventures II's profit members.

  During fiscal 1999, the Company recorded a pre-tax gain of approximately
$23.2 million on the sale of CMG@Ventures II's investment in Reel.com.
CMG@Ventures II's holdings in Reel.com were converted into approximately 1.9
million restricted common and approximately 486,000 restricted, convertible
preferred shares of Hollywood Entertainment, valued at a total of
approximately $32.8 million, as part of a merger wherein Hollywood
Entertainment acquired Reel.com. The preferred shares were subsequently
converted into common shares on a 1-for-1 basis. The gain is reported net of
the 20% interest attributable to CMG@Ventures II's profit members.

                                      56


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Also during fiscal 1999, the Company sold 818,000 of its Lycos shares on the
open market. As a result of the sale, the Company received proceeds of
approximately $53.1 million, and recognized a pre-tax gain of approximately
$45.5 million, reported net of the associated interest attributed to
CMG@Ventures I's profit members. As a result of the Company's sale of Lycos
shares, during fiscal 1999, the Company's ownership interest in Lycos fell
below 20% of Lycos' outstanding shares. With this decline in ownership below
20%, CMGI began accounting for its investment in Lycos (net of shares
attributable to CMG@Ventures I's profit members) as available-for-sale
securities, carried at fair value, rather than under the equity method.

(14)Borrowing Arrangements

  At July 31, 2001, notes payable totaling approximately $33.6 million
consisted of a borrowing arrangement entered into in connection with a hedge
of the Company's investment in Yahoo! common stock discussed below. At July
31, 2000, notes payable totaling approximately $523.0 million consisted of
three short-term promissory notes issued in connection with the Company's
acquisition of Tallan and the agreement entered into by the Company to hedge
its Yahoo! common stock.

  In March 2000, the Company issued three short-term promissory notes totaling
approximately $376.9 million as consideration for the Company's acquisition of
Tallan. During fiscal year 2001, the Company issued approximately 30.2 million
shares of its common stock as payment of the principal and interest associated
with these notes.

  In April 2000, the Company entered into a borrowing arrangement that hedges
a portion of the Company's investment in common stock of Yahoo!. Under the
terms of the contract, the Company agreed to deliver, at its discretion,
either cash or Yahoo! common stock in three separate tranches, with maturity
dates ranging from August 2000 to February 2001. The Company executed the
first tranche in April 2000 and received approximately $106.4 million. The
Company subsequently settled this tranche through the delivery of
581,499 shares of Yahoo! common stock in August 2000. In May 2000, the Company
received approximately $68.5 million and $5.7 million upon the execution of
the second and third tranches, respectively. The Company settled the second
tranche for cash totaling approximately $33.6 million in October 2000. The
Company settled the third tranche through the delivery of 47,684 shares of
Yahoo! common stock in February 2001. In November 2000, the Company entered
into a new agreement to hedge the Company's investment in 581,499 shares of
Yahoo! common stock. The Company received approximately $31.5 million of cash
in connection with this new agreement. Under the terms of the new contract,
the Company delivered 581,499 shares of Yahoo! common stock on August 1, 2001.

  SalesLink has a revolving credit agreement with a bank. The revolving credit
agreement provides for the option of interest at LIBOR or the higher of 1)
Prime, or 2) 0.5% above the Federal Funds Effective Rate plus, in any case, an
applicable margin based on SalesLink's leverage ratio (7.25% and 8.12%
effective rates at July 31, 2001 and 2000, respectively).

  At July 31, 2001 and 2000, SalesLink's revolving line of credit agreement
totaled $9.0 million, of which approximately $500,000 and $800,000 had been
reserved in support of outstanding letters of credit for operating leases,
respectively, and approximately $8.5 and $8.2 million was available for future
borrowings, respectively.


                                      57


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  Long-term debt consists of the following:



                                                                  July 31,
                                                              -----------------
                                                                2001     2000
                                                              -------- --------
                                                               (in thousands)
                                                                 
   Notes payable to Compaq................................... $220,000 $220,000
   Term notes payable to a bank issued by SalesLink..........    7,363   12,400
   Other.....................................................      664    2,272
                                                              -------- --------
                                                               228,027  234,672
   Less: Current portion.....................................    6,213    6,649
                                                              -------- --------
                                                              $221,814 $228,023
                                                              ======== ========


  In August 1999, the Company issued two three-year notes totaling $220.0
million to Compaq as consideration for the Company's acquisition of AltaVista.
The notes bear interest at an annual rate of 10.5% and are due and payable in
full in August 2002. Interest is due and payable semiannually on each February
18 and August 18 until the notes are paid in full. Principal and interest
payments due on the notes are payable in cash, shares of the Company's common
stock, other marketable securities, or any combination thereof at the option
of CMGI.

  SalesLink's term notes payable to a bank provide for the option of interest
at LIBOR or the higher of 1) Prime, or 2) 0.5% above the Federal Funds
Effective Rate plus, in any case, an applicable margin based on SalesLink's
leverage ratio (7.25% and 8.12% effective rates at July 31, 2001 and 2000,
respectively). The bank term notes outstanding at July 31, 2001 provide for
repayment in quarterly installments through October 2002.

  The obligations of SalesLink, under its bank line of credit and bank term
loans have been guaranteed by CMGI. SalesLink had no violations as of July 31,
2001. As of July 31, 2000, SalesLink was not in compliance with a certain
covenant of its borrowing arrangements. SalesLink has received a waiver for
such covenant violation.

  Maturities of long-term debt are approximated as follows: 2002, $6.2
million; 2003, $221.5 million; 2004, $0.3 million.

(15) Commitments and Contingencies

  The Company leases facilities and certain other machinery and equipment
under various non-cancelable operating leases and executory contracts expiring
through June 2016. Future minimum lease payments as of July 31, 2001 are as
follows:



                                                                  (in thousands)
                                                               
   Fiscal 2002..................................................     $178,887
     2003.......................................................      104,387
     2004.......................................................       52,842
     2005.......................................................       43,683
     2006.......................................................       36,421
     Thereafter.................................................      159,522
                                                                     --------
                                                                     $575,742
                                                                     ========


  Total future minimum lease payments have not been reduced by future minimum
sublease rentals of approximately $24.6 million.

                                      58


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Total rent and equipment lease expense charged to continuing operations was
approximately $114.4 million, $79.0 million, and $16.3 million for the years
ended July 31, 2001, 2000 and 1999, respectively.

  In August 2000, the Company announced it had acquired the exclusive naming
and sponsorship rights to the New England Patriots' new stadium, to be known
as "CMGI Field", for a period of fifteen years. In return for the naming and
sponsorship rights, CMGI will pay $7.6 million per year for the first ten
years, with consumer price index adjustments for years eleven through fifteen.
CMGI will not make its first semi-annual payment under this agreement until
January 2002.

  The Company leases facilities and certain machinery and equipment under non-
cancelable capital lease arrangements, which are not included in the table
above. The present value of net minimum capital lease obligations are $23.6
million.

  The Company and its subsidiaries are subject to legal proceedings and claims
which arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions
will not materially affect the financial position or results of operations of
the Company.

(16) Redeemable, Convertible Preferred Stock

  On June 29, 1999, CMGI completed a $375 million private placement of 375,000
shares of newly issued Series C Redeemable, Convertible Preferred Stock
("Series C Preferred Stock"). Each share of Series C Preferred Stock has a
stated value of $1,000 per share. The Company pays a semi-annual dividend of
2% per annum, in arrears, on June 30 and December 30 of each year at the
Company's option, in cash or through an adjustment to the liquidation
preference of the Series C Preferred Stock. Such adjustments, if any, also
increase the number of shares into which the Series C Preferred Stock is
convertible into common stock. The Series C Preferred Stock is segregated into
three separate tranches of 125,000 shares each. The shares in each tranche
have identical rights and preferences to shares in other tranches except as to
conversion price. The three tranches are convertible into common stock at
prices of $45.72, $37.58 and $37.66 per share prior to June 30, 2002. The
conversion price calculated for each tranche is also subject to adjustment for
certain actions taken by the Company. The Series C Preferred Stock may be
converted into common stock by the holders any time and automatically converts
into common stock on June 30, 2002 at a conversion price equal to the average
of the closing bid prices of the common stock on the ten consecutive trading
days ending on the trading day prior to June 30, 2002. The Series C Preferred
Stock is redeemable at the option of the holders upon the occurrence of
certain events.

(17) Stockholders' Equity

  In May 2000, stockholders of CMGI approved an amendment to the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of capital stock from 405,000,000 to 1,405,000,000 shares.

  In January 1999, May 1999 and January 2000 the Company effected 2-for-1
common stock splits in the form of stock dividends. Accordingly, all data
shown in the accompanying consolidated financial statements have been
retroactively adjusted to reflect these events.

  Effect of subsidiaries' equity transactions during fiscal 1999 primarily
related to equity transactions of NaviSite and Engage, prior to their initial
public offerings. In June 1999, NaviSite completed a private equity placement
of approximately 4.2 million preferred shares at $3.70 per share, raising net
proceeds to NaviSite of approximately $15.4 million. With this transaction,
the Company's ownership in NaviSite was reduced from approximately 99% to 89%.
An increase of approximately $7.9 million, net of deferred income taxes, has
been

                                      59


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
recorded in the accompanying Consolidated Statement of Stockholders' Equity to
reflect the increase in the Company's net equity in NaviSite as a result of
NaviSite's private placement. During April 1999, Engage acquired I/PRO for
consideration that included the issuance of approximately 1.0 million shares
of Engage common stock and Engage stock options valued at a total of
approximately $10.2 million. As a result of the issuance, the Company's
ownership in Engage was reduced from approximately 98% to 96%. An increase of
approximately $4.7 million, net of deferred income taxes, has been recorded in
the accompanying Consolidated Statement of Stockholders' Equity to reflect the
increase in the Company's net equity in Engage as a result of this
transaction.

  Effect of subsidiaries' equity transactions during fiscal 2000 was primarily
related to the equity transactions of Engage, AltaVista, CMGion and NaviSite.
In April 2000, Engage completed its acquisition of Flycast and Adsmart from
CMGI. As a result of this transaction, CMGI received approximately 64.3
million shares of Engage stock and the Company's ownership percentage in
Engage increased from approximately 81% to 87%. A decrease of approximately
$54.0 million has been recorded in the accompanying Consolidated Statements of
Stockholders' Equity to reflect the decrease in the Company's net equity in
Engage as a result of Engage's purchase of Flycast and Adsmart. In June 2000,
CMGI invested $50.0 million in Engage in exchange for approximately 3.3
million shares of Engage common stock. As a result of the transaction, the
Company's ownership percentage in Engage remained approximately 87%. A
decrease of approximately $5.1 million has been recorded in the accompanying
Consolidated Statement of Stockholders' Equity as a result of the transaction.
During the third quarter of fiscal 2000, AltaVista acquired Raging Bull and
Transium in exchange for AltaVista common stock. In addition, during the third
quarter, AltaVista also issued shares of its stock to CMGI and Compaq to
satisfy AltaVista's borrowings from CMGI and Compaq. As a result of these
transactions, CMGI's ownership in AltaVista decreased from approximately 82%
to 78%. An increase of approximately $38.8 million has been recorded in the
accompanying Consolidated Statements of Stockholders' Equity as a result of
these transactions. During April and May 2000, CMGion completed a private
placement of approximately 2.7 million preferred shares raising approximately
$60.0 million in net proceeds. With these transactions, the Company's
ownership percentage in CMGion decreased from 100% to approximately 85%. An
increase of approximately $30.0 million, net of deferred income taxes, has
been recorded in the accompanying Consolidated Statements of Stockholders'
Equity as a result of CMGion's private placement of its stock. In May 2000,
CMGI invested $50.0 million in NaviSite in exchange for approximately 981,000
shares of NaviSite common stock. As a result of the transaction, the Company's
ownership percentage in NaviSite remained approximately 70%. A decrease of
approximately $14.7 million, net of deferred income taxes, has been recorded
in the accompanying Consolidated Statements of Stockholders' Equity as a
result of the transaction.

  During fiscal 2000, the Company completed stock exchanges with four
companies. In November 1999, the Company received approximately 448.3 million
shares of PCCW common stock in exchange for approximately 8.2 million shares
of CMGI common stock. In April 2000, the Company received approximately 1.7
million shares of Netcentives common stock in exchange for approximately
425,000 shares of CMGI common stock. In May 2000, the Company received
approximately 8.0 million shares of Primedia common stock in exchange for
approximately 1.5 million shares of CMGI common stock. In July 2000, the
Company received approximately 1.7 million shares of Divine common stock in
exchange for approximately 372,000 shares of CMGI common stock.

  During fiscal 2001, CMGI received approximately 241.0 million shares of PCCW
stock in exchange for approximately 13.4 million shares of the Company's
common stock. During fiscal 2001, the Company issued approximately 30.2
million shares of its common stock as payment of principal and interest
totaling approximately $391.6 million related to notes payable that had been
issued in the Company's acquisition of Tallan. Also during fiscal 2001, the
Company issued approximately 2.3 million shares of its common stock to Compaq
as the interest payments valued at approximately $23.0 million related to
notes payable issued in the acquisition of AltaVista.

                                      60


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(18)  Stock Option Plans

  The Company currently awards stock options under two plans: the 2000 Stock
Option Plan (2000 Plan), which replaced the 1986 Stock Option Plan (1986 Plan)
and the 1999 Stock Option Plan For Non-Employee Directors (1999 Directors'
Plan), which replaced the 1995 Directors' Plan (1995 Directors' Plan). Options
granted under the 2000 Plan are generally exercisable in equal cumulative
installments over a four-to-ten year period beginning one year after the date
of grant. Options under the 1999 Directors' Plan become exercisable in 36
equal monthly installments beginning on the date of grant.

  In addition, the Company assumed several stock option plans of companies
which were acquired during fiscal 2000. Options to purchase a total of
approximately 10.2 million shares of CMGI common stock were assumed. The terms
and conditions of these assumed options were consistent with the terms of the
plans under which they were initially granted by the acquired companies.

  In October 2000, the Board of Directors adopted the 2000 Stock Incentive
Plan (2000 Plan), pursuant to which 15,500,000 shares of common stock are
reserved for issuance (subject to adjustment in the event of stock splits and
other similar events). No further option grants will be made under the 1986
Plan, however all outstanding options under the 1986 Plan remain in effect.

  Under the 2000 Plan, non-qualified stock options or incentive stock options
may be granted to the Company's or its subsidiaries' employees, consultants,
advisors or directors, as defined. The Board of Directors administers this
plan, selects the individuals to whom options will be granted, and determines
the number of shares and exercise price of each option. Outstanding options
under the 2000 Plan at July 31, 2001 expire through 2006.

  During fiscal 2000, the 1999 Directors' Plan replaced the Company's 1995
Directors' Plan, however, all outstanding options under the 1995 Directors'
Plan remained in effect. Options under the plans are granted at fair market
value on the date of the grant. Options under the 1995 Directors' Plan were
amended in fiscal year 2000 to provide that all options previously granted
under the plan vest monthly for the remainder of the five-year vesting term
(in contrast to the previous vesting schedule which consisted of five annual
20% installments). Options under the 1999 Directors' Plan are exercisable as
to 1/36th of the number of shares of Common Stock originally subject to the
option on each monthly anniversary of the date of grant, provided that the
optionee serves as a director on such monthly anniversary date. Outstanding
options under the 1995 Directors' Plan and the 1999 Directors' Plan at July
31, 2001 expire through 2011.

  Pursuant to the 1995 Directors' Plan, 4,512,000 shares of the Company's
common stock were initially reserved. Under the 1995 Directors' Plan, options
for 752,000 shares were to be granted to each Director who is neither an
officer or full time employee of the Company, nor an affiliate of an
institutional investor which owns shares of common stock of the Company.
Options were granted to existing Directors with five years of continuous
service at the date the Plan was adopted, and were granted to subsequent
Directors at the time of election to the Board.

  The 1999 Directors' Plan, approved in fiscal year 2000, replaces the
Company's 1995 Directors' Plan. No further option grants shall be made under
the 1995 Directors' Plan, however, all outstanding options under the 1995
Directors' Plan remain in effect. Pursuant to the 1999 Directors' Plan,
2,000,000 shares of the Company's common stock were initially reserved. Each
eligible director who is elected to the Board for the first time will be
granted an option to acquire 200,000 shares of Common Stock (the "Initial
Option"). Each Affiliated Director who ceases to be an Affiliated Director and
is not otherwise an employee of the Company or any of its subsidiaries or
affiliates will be granted, on the date such director ceases to be an
Affiliated Director but remains as a member of the Board of Directors, an
Initial Option to acquire 200,000 shares of Common

                                      61


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock under the plan. Each Initial Option will vest and become exercisable as
to 1/36th of the number of shares of Common Stock originally subject to the
option on each monthly anniversary of the date of grant, provided that the
optionee serves as a director on such monthly anniversary date. On each
anniversary of the grant of the Initial Option to an eligible director, each
eligible director will automatically be granted an option to purchase 24,000
shares of Common Stock (an "Annual Option"), provided that such eligible
director serves as a director on the applicable anniversary date. Each Annual
Option will vest and become exercisable on a monthly basis as to 1/12th of the
number of shares originally subject to the option commencing on the 37th month
after the grant date, provided that the optionee then serves as a director on
such monthly anniversary date.

  The status of the plans during the three fiscal years ended July 31, 2001,
was as follows:



                                    2001                     2000                     1999
                          ------------------------ ------------------------ ------------------------
                                       Weighted                 Weighted                 Weighted
                           Number      average      Number      average      Number      average
                          of shares exercise price of shares exercise price of shares exercise price
                          --------- -------------- --------- -------------- --------- --------------
                                          (in thousands, except exercise price data)
                                                                    
Options outstanding,
 beginning of year......    33,927      $30.09      20,829       $ 7.29      17,819       $1.11
  Granted...............     9,097        3.95      23,727        40.63       7,378       18.97
  Exercised.............    (3,307)       2.29      (8,152)        4.43      (3,781)       1.55
  Canceled..............   (11,465)      37.32      (2,477)       28.46        (587)       3.08
                           -------                  ------                   ------
Options outstanding, end
 of year................    28,252      $22.02      33,927       $30.09      20,829       $7.29
                           =======      ======      ======       ======      ======       =====
Options exercisable, end
 of year................    11,302      $21.80       8,974       $10.21       5,993       $0.41
                           =======      ======      ======       ======      ======       =====
Options available for
 grant, end of year.....    10,465                   8,713                   20,936
                           =======                  ======                   ======


  Included in the options granted during fiscal year 2000 are approximately
10.2 million shares assumed from acquired companies.

  The following table summarizes information about the Company's stock options
outstanding at July 31, 2001:



                                     Options Outstanding              Options Exercisable
                          ----------------------------------------- ------------------------
                                        Weighted
                                        average         Weighted                 Weighted
                           Number      remaining        average      Number      average
Range of exercise prices  of shares contractual life exercise price of shares exercise price
------------------------  --------- ---------------- -------------- --------- --------------
                                           (number of shares in thousands)
                                                               
       $  0.08--
         $  1.34            5,315      2.4 years         $ 0.23       3,677       $ 0.25
       $  1.35--
         $  3.94            8,492      4.9                 2.43       1,710         2.13
       $  3.95--
         $ 14.31            3,529      3.4                 5.74       1,456         5.71
       $ 14.32--
         $ 28.87            1,376      3.1                21.78         859        21.61
       $ 29.23--
         $ 42.94            4,085      3.0                40.50       1,507        40.91
       $ 42.95--
         $ 69.50            4,240      3.4                56.10       1,593        56.93
       $ 69.51--
         $105.94              183      3.4                92.50          72        91.81
       $105.95--
         $120.81              676      3.4               113.39         244       113.24
       $120.82--
         $221.65              332      4.2               139.27         160       138.43
       $221.66--
         $510.13               24      6.7               259.13          24       259.13
                           ------                                    ------
                           28,252      3.6 years         $22.02      11,302       $21.80
                           ======      =========         ======      ======       ======


                                      62


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  SFAS No. 123 sets forth a fair-value based method of recognizing stock-based
compensation expense. As permitted by SFAS No. 123, the Company has elected to
continue to apply APB No. 25 to account for its stock-based compensation
plans. Had compensation cost for awards in fiscal 1998, 1997 and 1996 under
the Company's stock-based compensation plans been determined based on the fair
value method set forth under SFAS No. 123, the pro forma effect on the
Company's net income (loss) and earnings (loss) per share would have been as
follows:




                                                   Years Ended July 31,
                                             ----------------------------------
                                                2001         2000        1999
                                             -----------  -----------  --------
                                             (in thousands, except per share
                                                          data)
                                                              
   Pro forma net income (loss).............. $(5,896,632) $(2,108,145) $454,631
                                             ===========  ===========  ========
   Pro forma net earnings (loss) per share:
     Basic.................................. $    (17.89) $     (8.06) $   2.44
                                             ===========  ===========  ========
     Diluted................................ $    (17.89) $     (8.06) $   2.20
                                             ===========  ===========  ========



  The fair value of each stock option grant has been estimated on the date of
grant using the Black-Scholes option pricing model, assuming no expected
dividends and the following weighted average assumptions:



                                                             Years Ended July
                                                                   31,
                                                             ------------------
                                                             2001   2000   1999
                                                             -----  -----  ----
                                                                  
   Volatility............................................... 126.9% 103.4% 97.3%
   Risk-free interest rate..................................   4.2%   6.3%  5.7%
   Expected life of options (in years)......................   4.4    3.1   3.1


  The weighted average fair value per share of options granted during fiscal
years 2001, 2000 and 1999 was $2.34, $33.85 and $13.01, respectively.

  The effect of applying SFAS No. 123 as shown in the above pro forma
disclosure is not likely to be representative of the pro forma effect on
reported income or loss for future years as SFAS No. 123 does not apply to
awards made prior to fiscal 1996.

(19)Employee Stock Purchase Plan

  On October 4, 1994, the Board of Directors of the Company adopted the 1995
Employee Stock Purchase Plan (the Plan). The purpose of the Plan is to provide
a method whereby all eligible employees of the Company and its subsidiaries
may acquire a proprietary interest in the Company through the purchase of
shares of common stock. Under the Plan, employees may purchase the Company's
common stock through payroll deductions. During fiscal year 2001, the Plan was
amended to reserve 1.0 million shares for issuance thereunder.

  At the beginning of each of the Company's fiscal quarters, commencing with
February 1, 1995, participants are granted an option to purchase shares of the
Company's common stock at an option price equal to 85% of the fair market
value of the Company's common stock on either the first business day or last
business day of the applicable quarterly period, whichever is lower.

  Employees purchased 752,705; 118,719; and 109,060 shares of common stock of
the Company under the Plan during fiscal years 2001, 2000 and 1999,
respectively.

                                      63


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(20) Income Taxes

  The total income tax provision (benefit) was allocated as follows:




                                                    Years Ended July 31,
                                                -------------------------------
                                                  2001       2000       1999
                                                ---------  ---------  ---------
                                                       (in thousands)
                                                             
   Income (loss) from continuing operations...  $(184,404) $(121,173) $ 325,402
   Discontinued operations....................        --         --      37,240
   Unrealized holding gain (loss) included in
    comprehensive income (loss), but excluded
    from net income...........................   (352,077)   167,020    215,835
   Subsidiaries' equity transactions charged
    directly to stockholders' equity..........    (20,498)   (43,230)     4,538
   Compensation expense for tax purposes in
    excess of amounts recognized for financial
    reporting purposes charged directly to
    stockholders' equity and reduction in
    previously recorded benefits..............     29,587   (189,943)   (43,202)
                                                ---------  ---------  ---------
   Total tax provision (benefit)..............  $(527,392) $(187,326) $ 539,813
                                                =========  =========  =========

  The income tax expense (benefit) from continuing operations consists of the
following:


                                                 Current   Deferred     Total
                                                ---------  ---------  ---------
                                                       (in thousands)
                                                             
   July 31, 1999:
     Federal..................................  $   7,262  $ 237,980  $ 245,242
     State....................................      5,695     74,465     80,160
                                                ---------  ---------  ---------
                                                $  12,957  $ 312,445  $ 325,402
                                                =========  =========  =========
   July 31, 2000:
     Federal..................................  $ 137,197  $(209,903) $ (72,706)
     State....................................     22,080    (70,547)   (48,467)
                                                ---------  ---------  ---------
                                                $ 159,277  $(280,450) $(121,173)
                                                =========  =========  =========
   July 31, 2001:
     Federal..................................  $  20,005  $(154,869) $(134,864)
     State....................................     24,332    (73,872)   (49,540)
                                                ---------  ---------  ---------
                                                $  44,337  $(228,741) $(184,404)
                                                =========  =========  =========



                                       64


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Deferred income tax assets and liabilities have been classified on the
accompanying Consolidated Balance Sheets in accordance with the nature of the
item giving rise to the temporary differences. The components of deferred tax
assets and liabilities are as follows:




                                    July 31, 2001                       July 31, 2000
                          -----------------------------------  --------------------------------
                           Current   Non-current     Total      Current   Non-current   Total
                          ---------  -----------  -----------  ---------  ----------- ---------
                                                   (in thousands)
                                                                    
Deferred tax assets:
 Accruals and reserves..  $ 201,853  $       --   $   201,853  $ 185,924   $     --   $ 185,924
 Tax basis in excess of
  financial basis of
  available-for-sale
  securities............     30,626          --        30,626     29,770         --      29,770
 Tax basis in excess of
  financial basis of
  investments in
  subsidiaries and
  affiliates............        --       116,574      116,574        --       31,353     31,353
 Net operating loss
  carryforwards.........        --       469,408      469,408                208,124    208,124
 Tax basis in excess of
  financial basis for
  intangible assets.....        --       498,888      498,888        --      144,588    144,588
                          ---------  -----------  -----------  ---------   ---------  ---------
 Total gross deferred
  tax assets............    232,479    1,084,870    1,317,349    215,694     384,065    599,759
 Less: valuation
  allowance.............   (232,479)  (1,084,870)  (1,317,349)  (110,682)   (331,298)  (441,980)
                          ---------  -----------  -----------  ---------   ---------  ---------
 Net deferred tax
  assets................        --           --           --     105,012      52,767    157,779
                          ---------  -----------  -----------  ---------   ---------  ---------
Deferred tax
 liabilities:
 Financial basis in
  excess of tax basis of
  investments in
  subsidiaries and
  affiliates............        --           --           --         --      (17,536)   (17,536)
 Financial basis in
  excess of tax basis of
  available-for-sale
  securities............    (18,860)         --       (18,860)  (497,352)        --    (497,352)
 Financial basis in
  excess of tax basis
  for intangible assets
  and fixed assets......        --       (20,795)     (20,795)       --      (96,596)   (96,596)
                          ---------  -----------  -----------  ---------   ---------  ---------
Total gross deferred tax
 liabilities............    (18,860)     (20,795)     (39,655)  (497,352)   (114,132)  (611,484)
                          ---------  -----------  -----------  ---------   ---------  ---------
Net deferred tax
 liability..............  $ (18,860) $   (20,795) $   (39,655) $(392,340)  $ (61,365) $(453,705)
                          =========  ===========  ===========  =========   =========  =========



  Subsequently reported tax benefits relating to the valuation allowance for
deferred tax assets as of July 31, 2001 will be allocated as follows:




                                                                 (in thousands)
                                                              
Income tax benefit recognized in the Consolidated Statement of
 Operations.....................................................   $1,269,014
Goodwill and other intangible assets............................       48,335
Accumulated other comprehensive income..........................           --
                                                                   ----------
                                                                   $1,317,349
                                                                   ==========



  The net change in the total valuation allowance for the year ended July 31,
2001 was an increase of $875.4 million. A full valuation allowance has been
recorded against the gross deferred tax asset since management believes that
after considering all the available objective evidence, both positive and
negative, historical and prospective, with greater weight given to historical
evidence, it is more likely than not that these assets will not be realized.

  The Company has net operating loss carryforwards for federal and state tax
purposes of approximately $1.04 billion and $493.7 million, of which,
approximately $762.3 million and $325.0 million, respectively, are subject to
significant limitations. The federal net operating losses will expire from
2009 through 2021 and the state net operating losses will expire from 2002
through 2016. A portion of the federal and state net operating loss
carryforwards is subject to significant limitation, including losses of
majority owned subsidiaries not included in the Company's consolidated tax
return group, losses that are subject to limitations under the separate return
limitation year rules and will only be available to offset future income of
the subsidiaries that generated the losses, and losses attributable to the
pre-acquisition periods of acquired subsidiaries. The utilization of net

                                      65


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
operating losses attributable to the pre-acquisition periods of acquired
subsidiaries may be limited by Internal Revenue Code Section 382 as a result
of prior ownership changes. An ownership change occurs when the ownership
percentage of 5% or greater stockholders changes by more than 50% over a
three-year period. Furthermore, pre-acquisition net operating losses may not
be utilizable in future years in the event of a substantial discontinuation of
the acquired business within two years of the acquisition date.

  Income tax expense attributable to income (loss) from continuing operations
differs from the computed expense computed by applying the U.S. federal income
tax rate of 35 percent to pre-tax income (loss) from continuing operations as
a result of the following:



                                                    Years Ended July 31,
                                               --------------------------------
                                                  2001        2000       1999
                                               -----------  ---------  --------
                                                       (in thousands)
                                                              
Computed "expected" tax expense (benefit)....  $(1,985,313) $(520,035) $262,236
Increase (decrease) in income tax expense
 resulting from:
 Non-deductible goodwill amortization and
  impairment charges.........................    1,290,251    250,797     5,316
 Losses not benefited........................      467,274    144,393    (2,813)
 Non-deductible in-process research and
  development charge related to acquisition
  of subsidiaries............................          512     22,989     2,121
 State income taxes, net of federal benefit..       41,302    (31,504)   52,104
 Other.......................................        1,570     12,187     6,438
                                               -----------  ---------  --------
Actual income tax expense (benefit)..........  $  (184,404) $(121,173) $325,402
                                               ===========  =========  ========



(21)Selected Quarterly Financial Information (unaudited)

  The following table sets forth selected quarterly financial for the years
ended July 31, 2001 and 2000. The operating results for any given quarter are
not necessarily indicative of results for any future period. The Company's
common stock is traded on the Nasdaq National Market under the symbol CMGI.
Included below are the high and low sales prices (adjusted for 2-for-1 stock
split effected on January 11, 2000) during each quarterly period for the
shares of common stock as reported by Nasdaq.




                                   Fiscal 2001 Quarter ended                      Fiscal 2000 Quarter ended
                          -----------------------------------------------  ------------------------------------------
                           Oct. 31     Jan. 31     Apr. 30      Jul. 31     Oct. 31    Jan. 31    Apr. 30    Jul. 31
                          ---------  -----------  ----------  -----------  ---------  ---------  ---------  ---------
                                     (Restated)   (Restated)  (Restated)
                                                             (in thousands)
                                                                                    
Net revenue.............  $ 358,050  $   334,962  $  289,143  $   255,547  $ 129,118  $ 158,540  $ 233,144  $ 369,619
Cost of revenue.........    325,087      310,518     260,054      236,119    114,460    128,520    190,618    301,566
Research and development
 expenses...............     51,669       46,093      35,621       25,577     20,188     31,424     49,671     52,647
In-process research and
 development expenses...      1,462          --          --           --         --       4,717     41,220     19,746
Selling expenses........    131,322      119,321      82,691       60,324     71,601    111,037    126,612    146,287
General and
 administrative
 expenses...............     84,250       75,242      64,999       56,614     30,053     43,564     61,314     83,333
Amortization of
 intangible assets and
 stock based
 compensation...........    582,533      549,484     247,439      178,708    170,039    253,831    465,287    513,518
Impairment of long-lived
 assets.................     69,606    1,998,966     609,491      685,254        --         --      16,700     17,505
Restructuring expenses..      8,841      100,031      18,526       89,821        --         --         --      14,770
                          ---------  -----------  ----------  -----------  ---------  ---------  ---------  ---------
Operating loss..........   (896,720)  (2,864,693) (1,029,678)  (1,076,870)  (277,223)  (414,553)  (718,278)  (779,753)
Interest income
 (expense), net.........    (10,469)       9,387       5,880        1,180        171      2,819      1,443    (19,529)
Non-operating gains
 (losses), net..........    323,927      (80,631)    (48,587)    (486,012)    94,717    171,720    233,525    105,690
Equity in losses of
 affiliates.............    (15,872)     (13,556)     (9,948)      (6,285)    (1,796)    (3,633)   (10,290)   (36,167)
Minority interest.......     88,852      250,907      53,564      133,300     23,288     31,576     55,980     54,427
Income tax benefit
 (expense)..............   (126,282)     160,912      42,130      107,644     43,431     26,496      9,581     41,665
                          ---------  -----------  ----------  -----------  ---------  ---------  ---------  ---------
Net loss................  $(636,564) $(2,537,674) $ (986,639) $(1,327,043) $(117,412) $(185,575) $(428,039) $(633,667)
                          =========  ===========  ==========  ===========  =========  =========  =========  =========
Market Price
High....................  $   49.13  $     24.81  $     6.94  $      6.50  $   57.59  $  163.50  $  151.50  $   75.13
                          =========  ===========  ==========  ===========  =========  =========  =========  =========
Low.....................  $   12.88  $      3.63  $     1.75  $      1.95  $   33.13  $   48.09  $   49.38  $   33.56
                          =========  ===========  ==========  ===========  =========  =========  =========  =========



                                      66


                          CMGI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(22) Subsequent Events

  Subsequent to July 31, 2001, the Company sold approximately 7.1 million
shares of Primedia stock for total proceeds of approximately $15.9 million.

  In August 2001, the Company issued approximately 5.4 million shares of its
common stock to Compaq as a semi-annual interest payment of $11.5 million
related to notes payable issued in the acquisition of AltaVista.

  In August 2001 the Company settled the final tranche under the borrowing
arrangement that hedges a portion of the Company's investment in the common
stock of Yahoo! through the delivery of 581,499 shares of Yahoo! common stock.

  In October 2001, the Company's Board of Directors approved, subject to
stockholder approval, an additional 2.0 million shares to be reserved for
issuance under the Company's Employee Stock Purchase Plan.

                                      67


                                    PART IV

ITEM 14.--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) Financial Statements, Financial Statement Schedule, and Exhibits

  1. Financial Statements. The financial statements listed in the Index to
Consolidated Financial Statements are filed as part of this report.

  2. Financial Statement Schedule. Financial Statement Schedule II of the
Company and the corresponding Report of Independent Auditors on Financial
Statement Schedule were previously filed as part of this Report and are
incorporated herein by reference.


  All other financial statement schedules have been omitted as they are either
not required, not applicable, or the information is otherwise included.

  3. Exhibits. The Exhibits listed in the Exhibit Index immediately preceding
such Exhibits are filed with or incorporated by reference in this report.

(B) Reports on Form 8-K

  The Company filed no reports on Form 8-K during the fourth quarter of 2001.

                                      68



                                 SIGNATURE


  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                             CMGI, INC.

                                             By:_/s/ George A. McMillan___


                                                  George A. McMillan


                                                Chief Financial Officer and
                                               Treasurer (Principal Financial
                                                and Accounting Officer)


Date: December 12, 2001



                                       69


                                 EXHIBIT INDEX


    
 3.1   Restated Certificate of Incorporation of the Registrant is incorporated
       herein by reference to Exhibit 4.1 to the Registrant's Registration
       Statement on Form S-3 (File No. 333-85047).
 3.2   Certificate of Designations, Preferences and Rights of Series D
       Preferred Stock of the Registrant is incorporated herein by reference to
       Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated August
       18, 1999 (File No. 000-23262).
 3.3   Amendment of Restated Certificate of Incorporation of the Registrant,
       dated May 5, 2000 is incorporated herein by reference to Exhibit 3.1 to
       the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
       ended April 30, 2000 (File No. 000-23262).
 3.4   Restated By-Laws of the Registrant, as amended, are incorporated herein
       by reference to Exhibit 3.3 of the Registrant's Registration Statement
       on Form S-4 (File No. 333-92107).
 4.1   Specimen stock certificate representing the Registrant's Common Stock is
       incorporated herein by reference to Exhibit 4.1 of the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 4.2   Promissory note, dated August 18, 1999, issued to Digital Equipment
       Corporation, in the principal amount of $138,000,000 is incorporated
       herein by reference to Exhibit 4.2 to the Registrant's Current Report on
       Form 8-K dated August 18, 1999 (File No. 000-23262).
 4.3   Promissory note, dated August 18, 1999, issued to Compaq Computer
       Corporation, in the principal amount of $82,000,000 is incorporated
       herein by reference to Exhibit 4.3 to the Registrant's Current Report on
       Form 8-K dated August 18, 1999 (File No. 000-23262).
 4.4   Form of senior indenture is incorporated herein by reference to Exhibit
       4.1 to the Registrant's Registration Statement on Form S-3 (File No.
       333-93005).
 4.5   Form of subordinated indenture is incorporated herein by reference to
       Exhibit 4.2 to the Registrant's Registration Statement on Form S-3 (File
       No. 333-93005).
 10.1* 2000 Stock Incentive Plan is incorporated herein by reference to
       Appendix II to the Registrant's Definitive Schedule 14A filed November
       17, 2000 (File No. 000-23262).
 10.2* 1986 Stock Option Plan, as amended, is incorporated herein by reference
       to Appendix IV to the Registrant's Definitive Schedule 14A filed
       November 17, 1999 (File No. 000-23262).
 10.3* Amended and Restated 1995 Employee Stock Purchase Plan, as amended, is
       incorporated herein by reference to Exhibit 10.2 to the Registrant's
       Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
       2001 (File No. 000-23262).
 10.4* Amended and Restated 1999 Stock Option Plan For Non-Employee Directors
       is incorporated herein by reference to Exhibit 10.1 to the Registrant's
       Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
       2001 (File No. 000-23262).
 10.5* FY 2001 CMGI Executive Bonus Plan is incorporated herein by reference to
       Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the
       fiscal quarter ended January 31, 2001 (File No. 000-23262).
 10.6* CMGI and Participating Subsidiaries Deferred Compensation Plan, is
       incorporated by reference to Exhibit 10.9 to the Registrant's Quarterly
       Report on Form 10-Q for the fiscal quarter ended January 31, 1999 (File
       No. 000-23262).
 10.7* Employment Agreement, dated August 1, 1993, between the Registrant and
       David S. Wetherell is incorporated herein by reference to Exhibit 10.10
       of the Registrant's Registration Statement on Form S-1 (File No. 33-
       71518).





      
 10.8*   Amendment No. 1 to Employment Agreement, dated January 20, 1994,
         between the Registrant and David S. Wetherell is incorporated herein
         by reference to Exhibit 10.18 of the Registrant's Registration
         Statement on Form S-1 (File No. 33-71518).
 10.9*   Amendment No. 2 to Employment Agreement, dated October 25, 1996,
         between the Registrant and David S. Wetherell is incorporated herein
         by reference to Exhibit 10.2 to the Registrant's Quarterly Report on
         Form 10-Q for the fiscal quarter ended October 31, 1996 (File No. 000-
         23262).
 10.10*+ Amendment No. 3 to Employment Agreement, dated August 3, 2001, between
         the Registrant and David S. Wetherell.
 10.11*+ Executive Retention Agreement, dated July 9, 2001, between the
         Registrant and David Andonian.
 10.12*+ Offer Letter from the Registrant to George A. McMillan, dated June 11,
         2001.
 10.13*+ Executive Severance Agreement, dated June 11, 2001, between the
         Registrant and George A. McMillan.
 10.14*  Form of Director Indemnification Agreement (executed by the Registrant
         and each of David S. Wetherell, Barry K. Allen, Jonathan Kraft and
         Peter McDonald) is incorporated herein by reference to Exhibit 10.1 to
         the Registrant's Annual Report on Form 10-K for the fiscal year ended
         July 31, 1998 (File No. 000-23262).
 10.15   Lease dated as of April 12, 1999 between Andover Mills Realty Limited
         Partnership and the Registrant for premises located at 100 Brickstone
         Square, Andover, Massachusetts is incorporated herein by reference to
         Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended July 31, 1999 (File No. 000-23262).
 10.16   Amendment No. 1 to Lease dated as of July 19, 1999 between Andover
         Mills Realty Limited Partnership and the Registrant for premises
         located at 100 Brickstone Square, Andover, Massachusetts is
         incorporated herein by reference to Exhibit 10.2 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 1999
         (File No. 000-23262).
 10.17   Amendment No. 2 to Lease, dated as of November 12, 1999, between
         Andover Mills Realty Limited Partnership and the Registrant for
         premises located at 100 Brickstone Square, Andover, Massachusetts is
         incorporated herein by reference to Exhibit 10.6 to the Registrant's
         Quarterly Report on Form 10-Q for the fiscal quarter ended October 31,
         1999 (File No. 000-23262).
 10.18   Amendment No. 3 to Lease dated as of March 28, 2000 between Andover
         Mills Realty Limited Partnership and the Registrant for premises
         located at 100 Brickstone Square, Andover, Massachusetts is
         incorporated herein by reference to Exhibit 10.13 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 2000
         (File No. 000-23262).
 10.19   Amendment No. 4 to Lease, dated as of May 11, 2000 between Andover
         Mills Realty Limited Partnership and the Registrant for premises
         located at 100 Brickstone Square, Andover, Massachusetts is
         incorporated herein by reference to Exhibit 10.14 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 2000
         (File No. 000-23262).
 10.20+  Amendment No. 5 to Lease, dated as of December 18, 2000 between
         Andover Mills Realty Limited Partnership and the Registrant for
         premises located at 100 Brickstone Square, Andover, Massachusetts.
 10.21+  Amendment No. 6 to Lease, dated as of April 17, 2001 between Andover
         Mills Realty Limited Partnership and the Registrant for premises
         located at 100 Brickstone Square, Andover, Massachusetts
 10.22+  Amendment No. 7 to Lease, dated as of April 18, 2001 between Andover
         Mills Realty Limited Partnership and the Registrant for premises
         located at 100 Brickstone Square, Andover, Massachusetts
 10.23   Lease Agreement by and between Carolina Blackhawk, LLC and Engage,
         Inc. dated October 1999, is incorporated herein by reference to
         Exhibit 10.3 to Engage's Quarterly Report on Form 10-Q for the quarter
         ended October 31, 1999 (File No. 000-26671).





    
 10.24 Lease dated as of September 13, 1999 between Arastradero Property and
       AltaVista Company for premises located at 1070 Arastradero Road, Palo
       Alto, California is incorporated herein by reference to Exhibit 10.3 to
       the Registrant's Annual Report on Form 10-K for the fiscal year ended
       July 31, 1999 (File No. 000-23262).
 10.25 Lease, dated January 6, 1998, between the Medford Nominee Trust and
       SalesLink Corporation for premises located at 425 Medford Street,
       Boston, Massachusetts is incorporated herein by reference to Exhibit
       10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal
       quarter ended April 30, 1998 (File No. 000-23262).
 10.26 Lease, dated September 1, 1998, between Cabot Industrial Properties,
       L.P. and SalesLink Corporation for premises at 6112 West 73rd Street,
       Bedford Park, Illinois is incorporated herein by reference to Exhibit
       10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year
       ended July 31, 1999 (File No. 000-23262).
 10.27 Lease, dated June 30, 1995, between Windy Pacific Partners and Pacific
       Mailing Corporation for premises located at Lot #2, Dumbarton Business
       Center, Central Ave., Newark, California is incorporated herein by
       reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
       for the fiscal year ended July 31, 1999 (File No. 000-23262).
 10.28 First Amendment to Lease Between Windy Pacific Partners and Pacific
       Mailing Corporation, dated May 28, 1996 for premises located at Lot #2,
       Dumbarton Business Center, Central Ave., Newark, California is
       incorporated herein by reference to Exhibit 10.8 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 10.29 Lease, dated July 30, 1995, between Windy Pacific Partners and Pacific
       Mailing Corporation for premises located at Lot #3, Dumbarton Business
       Center, Central Ave., Newark, California is incorporated herein by
       reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K
       for the fiscal year ended July 31, 1999 (File No. 000-23262).
 10.30 First Amendment to Lease Between Windy Pacific Partners and Pacific
       Mailing Corporation, dated December 22, 1995 for premises located at Lot
       #3, Dumbarton Business Center, Central Ave., Newark, California is
       incorporated herein by reference to Exhibit 10.10 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 10.31 Second Amendment to Lease Between Windy Pacific Partners and Pacific
       Mailing Corporation, dated May 28, 1996 for premises located at Lot #3,
       Dumbarton Business Center, Central Ave., Newark, California is
       incorporated herein by reference to Exhibit 10.11 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 10.32 Third Amendment to Lease Between Windy Pacific Partners and Pacific
       Mailing Corporation, dated September 25, 1996 for premises located at
       Lot #3, Dumbarton Business Center, Central Ave., Newark, California is
       incorporated herein by reference to Exhibit 10.12 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 10.33 Lease, dated September 25, 1996, between Windy Pacific Partners and
       Pacific Direct Marketing Corp. DBA Pacific Link for premises at Lot #4
       Dumbarton Business Center, Central Ave., Newark, California is
       incorporated herein by reference to Exhibit 10.13 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 1999 (File
       No. 000-23262).
 10.34 Capital & Counties plc and Engage Technologies Limited underlease, dated
       April 27, 1999, is incorporated herein by reference to Exhibit 10.14 to
       Engage's Registration Statement on Form S-1 (File No. 333-78015).
 10.35 Lease dated as of March 21, 1997 by and between William J. Callahan and
       William J. Callahan, Jr., as trustees of Andover Park Realty Trust, and
       the Registrant is incorporated herein by reference to Exhibit 10.5 to
       NaviSite's Registration Statement on Form S-1 (File No. 333-83501).




    
 10.36 Lease dated as of May 14, 1999 by and between 400 River Limited
       Partnership and NaviSite, Inc. is incorporated herein by reference to
       Exhibit 10.6 to NaviSite's Registration Statement on Form S-1
       (File No. 333-83501).
 10.37 Lease made as of April 30, 1999 by and between CarrAmerica Realty
       Corporation and NaviSite, Inc. is incorporated herein by reference to
       Exhibit 10.7 to NaviSite's Registration Statement on Form S-1
       (File No. 333-83501).
 10.38 Lease made as of August 31, 2000 by and between Industrial Developments
       International (Tennessee), L.P. and SalesLink Corporation for premises
       located at 6100 Holmes Road, Suite 101, Memphis, Tennessee is
       incorporated herein by reference to Exhibit 10.35 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 2000 (File
       No. 000-23262).
 10.39 Lease dated March 14, 2000 by and between CMGI (UK) Limited and Britel
       Fund Trustees Limited for premises (third floor) located at Prospect
       House, 80 to 110 New Oxford Street London WC1 is incorporated herein by
       reference to Exhibit 10.36 to the Registrant's Annual Report on Form 10-
       K for the fiscal year ended July 31, 2000 (File No. 000-23262).
 10.40 Lease dated March 14, 2000 by and between CMGI (UK) Limited and Britel
       Fund Trustees Limited for premises (fourth floor) located at Prospect
       House, 80 to 110 New Oxford Street London WC1 is incorporated herein by
       reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-
       K for the fiscal year ended July 31, 2000 (File No. 000-23262).
 10.41 Lease dated March 14, 2000 by and between CMGI (UK) Limited and Britel
       Fund Trustees Limited for premises (fifth floor) located at Prospect
       House, 80 to 110 New Oxford Street London WC1 is incorporated herein by
       reference to Exhibit 10.38 to the Registrant's Annual Report on Form 10-
       K for the fiscal year ended July 31, 2000 (File No. 000-23262).
 10.42 Lease dated as of February 4, 2000 by and between the Registrant and TST
       555/575 Market, L.L.C. for premises located at 575 Market Street, San
       Francisco, California is incorporated herein by reference to Exhibit
       10.40 to the Registrant's Annual Report on Form 10-K for the fiscal year
       ended July 31, 2000 (File No. 000-23262).
 10.43 First Amendment to Lease dated as of February 29, 2000 by and between
       the Registrant and TST 555/575 Market, L.L.C. for premises located at
       575 Market Street, San Francisco, California is incorporated herein by
       reference to Exhibit 10.41 to the Registrant's Annual Report on Form 10-
       K for the fiscal year ended July 31, 2000 (File No. 000-23262).
 10.44 Lease dated May 9, 2000 by and between CMGI (UK) Limited and SA Daffodil
       for premises located at 43-45-47 Avenue de la Grande Armee, 22-24 rue
       Chalgrin, Paris, France is incorporated herein by reference to Exhibit
       10.42 to the Registrant's Annual Report on Form 10-K for the fiscal year
       ended July 31, 2000 (File No. 000-23262).
 10.45 Lease dated September 22, 2000 by and between CMGI (UK) Limited and DIFA
       for premises located at Chilehaus, Fischertwiete 2, 20095 Hamburg is
       incorporated herein by reference to Exhibit 10.43 to the Registrant's
       Annual Report on Form 10-K for the fiscal year ended July 31, 2000
       (File No. 000-23262).
 10.46 Sublease by and between the Registrant and Engage, Inc., dated November
       1, 2000, is incorporated herein by reference to Exhibit 10.1 to Engage's
       Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
       2001 (File No. 000-26671).
 10.47 Share Exchange Agreement, dated as of September 22, 1999, by and between
       the Registrant and Pacific Century CyberWorks Limited is incorporated
       herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report
       on Form 10-Q for the fiscal quarter ended October 31, 1999 (File No.
       000-23262).




     
 10.48  Registration Rights Agreement, dated as of November 29, 1999, by and
        between the Registrant and Pacific Century CyberWorks Limited is
        incorporated herein by reference to Exhibit 10.2 to the Registrant's
        Quarterly Report on Form 10-Q for the fiscal quarter ended October 31,
        1999
        (File No. 000-23262).
 10.49  Stock Purchase Agreement, dated as of June 19, 2000, by and among the
        Registrant, Engage, Inc. and Compaq Computer Corporation is
        incorporated herein by reference to Exhibit 1 to the Registrant's
        Schedule 13D/A, dated June 19, 2000 (File No. 005-58487).
 10.50  Common Stock Purchase Agreement, dated as of June 8, 2000, by and
        between the Registrant and NaviSite, Inc. in incorporated herein by
        reference to Exhibit 10.1 to NaviSite's Quarterly Report on Form 10-Q
        for the fiscal quarter ended April 30, 2000 (File No. 000-27597).
 10.51  Note and Warrant Purchase Agreement, dated as of December 12, 2000, by
        and between the Registrant and NaviSite, Inc. is incorporated herein by
        reference to Exhibit 10.3 to NaviSite's Quarterly Report on Form 10-Q
        for the fiscal quarter ended October 31, 2000 (File No. 000-27597).
 10.52  Securities Purchase Agreement, dated as of June 29, 1999, by and among
        the Registrant and the investors named therein is incorporated herein
        by reference to Exhibit 99.1 to the Registrant's Current Report on Form
        8-K dated June 29, 1999 (File No. 000-23262).
 10.53  Registration Rights Agreement, dated as of June 29, 1999 by and among
        the Registrant and the investors named therein is incorporated herein
        by reference to Exhibit 99.2 to the Registrant's Current Report on Form
        8-K dated June 29, 1999 (File No. 000-23262).
 10.54  Share Sale Agreement dated as of February 29, 2000 by and between the
        Registrant and Cable & Wireless Far East Limited is incorporated herein
        by reference to Exhibit 10.1 to the Registrant's Quarterly Report on
        Form 10-Q for the fiscal quarter ended October 31, 2000 (File No. 000-
        23262).
 10.55  Registration Rights Agreement dated as of August 24, 2000 by and
        between the Registrant and Cable & Wireless Far East Limited is
        incorporated herein by reference to Exhibit 10.2 to the Registrant's
        Quarterly Report on Form 10-Q for the fiscal quarter ended October 31,
        2000 (File No. 000-23262).
 10.56* CMG @Ventures, Inc. Deferred Compensation Plan is incorporated herein
        by reference to Exhibit 10.1 to the Registrant's Quarterly Report on
        Form 10-Q for the fiscal quarter ended April 30, 1997 (File No. 000-
        23262).
 10.57* CMG @Ventures I, LLC Limited Liability Company Agreement, dated
        December 18, 1997 is incorporated herein by reference to Exhibit 10.1
        to the Registrant's Quarterly Report on Form 10-Q for the fiscal
        quarter ended April 30, 1998 (File No. 000-23262).
 10.58* CMG @Ventures II, LLC Operating Agreement, dated as of February 26,
        1998 is incorporated herein by reference to Exhibit 10.69 to the
        Registrant's Annual Report on Form 10-K for the fiscal year ended July
        31, 1998 (File No. 000-23262).
 10.59* Summary of Management's Interests in the @Ventures III Venture Capital
        Funds is incorporated herein by reference to Exhibit 10.45 to the
        Registrant's Annual Report on Form 10-K for the fiscal year ended July
        31, 1999 (File No. 000-23262).
 10.60* Limited Liability Company Agreement of CMG @Ventures III, LLC, dated
        August 7, 1998 is incorporated herein by reference to Exhibit 10.46 to
        the Registrant's Annual Report on Form 10-K for the fiscal year ended
        July 31, 1999 (File No. 000-23262).
 10.61* Agreement of Limited Partnership of @Ventures III, L.P., dated August
        7, 1998 is incorporated herein by reference to Exhibit 10.47 to the
        Registrant's Annual Report on Form 10-K for the fiscal year ended July
        31, 1999 (File No. 000-23262).





      
 10.62*  Amendment No. 1 to the Agreement of Limited Partnership of @Ventures
         III, L.P., dated August 7, 1998 is incorporated herein by reference to
         Exhibit 10.48 to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended July 31, 1999 (File No. 000-23262).
 10.63*  Agreement of Limited Partnership of @Ventures Foreign Fund III, L.P.,
         dated December 22, 1998 is incorporated herein by reference to Exhibit
         10.49 to the Registrant's Annual Report on Form 10-K for the fiscal
         year ended July 31, 1999 (File No. 000-23262).
 10.64*  Amendment No. 1 to the Agreement of Limited Partnership of @Ventures
         Foreign Fund III, L.P., dated December 22, 1998 is incorporated herein
         by reference to Exhibit 10.50 to the Registrant's Annual Report on
         Form 10-K for the fiscal year ended July 31, 1999 (File No. 000-
         23262).
 10.65*  Agreement of Limited Partnership of @Ventures Expansion Fund, L.P.,
         dated as of February 25, 2000 is incorporated herein by reference to
         Exhibit 10.64 to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended July 31, 2000 (File No. 000-23262).
 10.66*  Agreement of Limited Partnership of @Ventures Foreign Expansion Fund,
         L.P., dated as of March 8, 2000 is incorporated herein by reference to
         Exhibit 10.65 to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended July 31, 2000 (File No. 000-23262).
 10.67*  Limited Liability Company Agreement of @Ventures Expansion Partners,
         LLC, dated as of February 10, 2000 is incorporated herein by reference
         to Exhibit 10.66 to the Registrant's Annual Report on Form 10-K for
         the fiscal year ended July 31, 2000 (File No. 000-23262).
 10.68*  Limited Liability Company Agreement of CMG@Ventures Expansion, LLC,
         dated as of February 10, 2000 is incorporated herein by reference to
         Exhibit 10.67 to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended July 31, 2000 (File No. 000-23262).
 10.69+  Amended and Restated CMGI @Ventures IV, LLC Limited Liability Company
         Agreement, dated as of July 27, 2001.
 10.70*+ FY 2002 Bonus Plan for CMGI Corporate.
 10.71*+ FY 2002 Bonus Plan for Operating Companies.
 21+     Subsidiaries of the Registrant.
 23      Consent of Independent Auditors.


--------
*  Management contract or compensatory plan or arrangement filed in response
   to Item 14(a)(3) of the instructions to Form 10-K.

+  Previously filed.