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RoweCom Acquires Dawson Information Services Group
by
Posted On September 27, 1999
RoweCom, Inc. (http://www.rowe.com), of Internet-based Knowledge Store and Knowledge Library fame, has announced that it has inked a deal to acquire U.K.-based Dawson Information Services Group (ISG), one of the world's largest information services organizations. The deal involves approximately $56 million in a combination of cash and stock.

RoweCom is a subscription service that has taken the e-commerce approach. Its catalog includes 120,000 titles from over 17,000 publishers, as well as 8 million discounted books through its partner Barnes & Noble (http://www.barnesandnoble.com). Its broadly based clientele ranges from Fortune 1000 companies to academic libraries.

It's a good deal for RoweCom, since the acquisition is expected to add more than $350 million in annual revenues and significantly enhance its gross margins as well as accelerate profitability. A certain amount of personal satisfaction must also be involved for Richard Rowe, the company's president and CEO. In the early '90s, he headed Dawson Information Services under the Faxon name, but had to sell it.

The acquisition fulfills several tenets of RoweCom's growth strategy. By acquiring Dawson, it will expand its market share with the instant addition of over 20,000 clients from the U.S., Canada, and Europe; expand its current catalog; and expand internationally.

The group employs approximately 500 people and serves over 20,000 clients, most of which are in RoweCom's core vertical and academic markets. Many are traditional subscription-service customers, but apparently the plan is to ultimately convert all of them to RoweCom's Web-based kStore or kLibrary from their current services.

"The financial opportunities presented by this acquisition are tremendous," said Louis Hernandez, executive vice president and CFO of RoweCom. "By transitioning this traditional business model to our Internet platform, we will significantly improve its profitability. And the financial leverage of this opportunity is truly global in scope. As the size of our Internet platform grows, the opportunity to exploit the scale of the platform also grows as we gain an enhanced ability to upsell additional content to individual users in a variety of forms."

Richard Rowe said: "This acquisition significantly accelerates our international growth strategy. Acquiring Dawson will benefit our new and existing clients, content providers, employees, and shareholders. New clients will benefit from the reduced cost, heightened control, and convenience that a Web-based solution affords. Our existing clients will benefit from expanded content. And our content providers, employees, and shareholders will benefit from the immediate increase in transaction growth, a key indicator in the future success of the company."

Good News or Bad?

This is clearly a good move for RoweCom, and all the industry analysts I've spoken to agree. But is it good news for libraries? It should be. The whole point of subscription agencies is to centralize and simplify acquisition. RoweCom's expansion, in terms of content and geography, is going to offer a better service. And it had better be a better service, since the deal will leave libraries with fewer alternatives. However, the constituent companies are all long-standing trusted suppliers, and RoweCom's e-commerce bent is promisingly forward-looking.

Bigger can indeed be better. Doug Greene, global purchasing director of Dun & Bradstreet Corp., said: "We have identified the ability to serve customers globally as a key component of supplier success, and it is critical to D&B's purchasing and supply-chain strategy. Whether you are a multinational organization or a U.S.-based entity with overseas opportunities, the need for a global presence is critical. Now, as RoweCom's offerings multiply, our associates will enjoy immediate access to these knowledge resources with the same cost-saving and control features to which we are accustomed."

Outsell, the research and advisory service for the information industry, stated the question clearly in its weekly electronic newsletter, E-Briefs: "RoweCom has been known to bypass corporate libraries and sell its services to purchasing or administrative units. It will have to find a way to move traditional library accounts onto its e-commerce platforms while continuing to provide the back-end services that libraries need for complete content management—and demonstrate that it is an ally and not an adversary."

And that remains to be seen.


Paul Nicholls is a consultant, editor of NewMedia Canada, and an associate of the Media Research Institute.

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