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Dialog Expands E-Commerce Initiatives and Reports Mixed Q2 Results
by
Posted On September 20, 1999
In late August, the Dialog Corporation announced the launch of Sparza Limited as a wholly owned subsidiary that will operate as the software sales arm of its eCommerce Division, one of Dialog's three divisions. Sparza will concentrate on the sale of e-commerce software to manufacturers, wholesalers, and resellers. The company also announced a licensing deal with Spicers Ltd., reportedly Europe's largest office products wholesaler.

According to the company, Sparza offers four software modules, which can be integrated into a client's organization or used separately. The four modules are Sparza Buy (a procurement management system), Sparza Sell (online storefront), Sparza Resell (for wholesalers and aggregators to resell), and Sparza Host, which "enables organizations to outsource to Sparza the development, hosting, and client service of a co-branded ‘storefront' on the Web." Sparza supplies the underlying technology behind OfficeShopper, an Internet-based commercial office products service that launched in the U.K in December 1998, and is due to launch in the U.S. by the end of 1999. According to the company, U.S. vendors have already been signed, providing over 30,000 products at launch.

Dan Wagner, CEO of Dialog, said, "Today's announcement marks a significant step forward in our strategy of expanding the software sales element of our business. The opportunity offered by the fast-growing business-to-business e-commerce software market is huge, so our mission with Sparza is to deliver more targeted solutions than we believe are currently available via other suppliers such as Ariba and Commerce One."

Q2, Interim Year Results

At the same time, Dialog reported its second quarter results and interim year results. The press release focused on "improved Q2 revenues, reflecting growth in new Web-based products and technologies." Specifically, the company highlighted Q2 revenues of $70.4 million, up 4.6 percent on Q1, and Q2 operating profit of $9.3 million, up 20 percent on Q1. Looking closer at the actual numbers however, revealed a less positive picture. Analysts, stock holders, and the media zeroed in on the sharp fall in half-year profits over the previous year. The first half of 1999 pre-tax profits were $2.7 million, down from $11 million for the first half of 1998, showing a 76 percent drop. Predictably, Dialog's shares tumbled on the news.

Facing debt problems, disappointing financial results, and a sagging stock price, Dialog's management continues to look for solutions, while the media continue to speculate about the spin-off or sale of a division. The company is looking at options to refinance its $22 million debt, so that it can generate funds to take advantage of growth opportunities. The company is also anticipating that revenues contracted through its deal with Fujitsu will be in excess of $15.8 million in Q3. Dialog and Fujitsu announced the agreement in June 1999 for Fujitsu to redistribute all of Dialog's information products.

Fujitsu is also developing a Japanese version of InfoSort, the indexing and categorization software solution sold by Dialog's Web Solutions Division. The financial report also included the news that the Web Solutions Division is developing a new Internet search engine, WebTop.com. A Reuters article about Dialog's discussions with financial analysts called the new product a "business portal." A company spokesperson indicated that the new product would be shown in London in December at Online Information 99, and said that the "whole area of portals is definitely interesting to the company."

Pricing and DialUnits

Meanwhile, the saga continues over pricing changes and the infamous DialUnits. In its financial report, the company stated that revenues in its Information Services Division (with the Dialog, DataStar, and Profound brands) were negatively affected by an unintentioned 10 percent price reduction due to a new price structure.

Now, Dialog has announced the following in its Sept.-Oct. 1999 Chronolog: "The Dialog Corporation will replace DialUnit pricing next year with a new pricing structure that is easier to understand and more predictable. The goal is to design a pricing structure that will, on average, not increase or decrease charges for Dialog services." To follow the history of the pricing story and its impact on customers, including actual cost comparisons for searches, see the recent series of articles by Mary Ellen Bates in Searcher magazine and on the Information Today, Inc. Web site (http://www.infotoday.com).

For more information, visit http://www.sparza.com, http://www.dialog.com.


Paula J. Hane is a freelance writer and editor covering the library and information industries. She was formerly Information Today, Inc.’s news bureau chief and editor of NewsBreaks.


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