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Hoover's Announces Plans to Streamline Products, Focus on Subscriptions, Trim Sta
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Posted On October 1, 2001
Hoover's, Inc., the well-known Austin, Texas-based provider of online business information, announced some big changes to its business in a conference call and Webcast held on Wednesday, September 26. (It's available for replay at http://www.hoovers.com. Select "About Hoover's," and click on "Investor Relations.") The operator of Hoover's Online is obviously feeling the pressures of the current economic climate and has decided to implement some streamlining and cost-cutting measures that it hopes will increase profitability, help its lagging stock, and position the company for growth once the economy recovers. Specifically, the company announced that it would now focus on growing its core subscription business, discontinue unprofitable products, and reduce staffing by 20 percent.

Jeffrey Tarr, who was appointed Hoover's president and CEO in May, said: "Over the past 4 months, our management team and our board of directors have been working together to strengthen our company. We performed an extensive review of our products, services, and market segments and determined that we need to make a number of changes to our business in order to position the company for long-term growth, achieve net income profitability, and strengthen our company overall."

Hoover's has had a business model that consisted of multiple revenue streams, including subscriptions, advertising, licensing, books, and CD-ROMs. However, with subscriptions generating 63 percent of its total revenues, the company views that model as "the principal growth driver in the current economic environment," and announced that it would now form the main focus of its strategy. Tarr noted that the significant decline in advertising that all businesses have experienced has created a drag on the company's growth.

Tarr cited Hoover's in-depth market analysis, which shows the demand in the U.S. for business information services like Hoover's is estimated to be $800 million. (Current annual net revenue for the company is around $30 million.) Hoover's has been targeting sales to a broad mass market of business users, but its market strengths have been in subscriptions to sales, marketing, and business development professionals, and to senior-level executives. Tarr indicated that this would now be the focus of the company's efforts. "We intend to focus our efforts and resources on this customer segment that is the largest generator of revenue for our business today and that we believe offers the greatest opportunity for future revenue growth."

Tarr spoke optimistically about the company's prospects, despite the recent doom-and-gloom economic situation. He noted that it has ample cash and no long-term debt. The company will have its regularly scheduled quarterly earnings conference call in October. At this point it predicts $7.6 million in revenues for the quarter with a net loss of $.30 a share. Tarr believes Hoover's stock is undervalued; it trades at a discount compared to its peers. He stressed that the company's goals were to increase the value of its stock and thereby increase shareholder value. Hoover's also plans to improve its investor relations. Analysts on the conference call seemed receptive to the strategies, and one complimented the company on its proactive outreach and planning.

In assessing the competition, Tarr placed Hoover's in good standing. On the low end, it has been dogged by the free and low-cost consumer sites, like Yahoo! Finance and Business.com. The coverage on these sites doesn't begin to approach Hoover's. Many of them are experiencing difficulties due to declining advertising, and are now pulling back or folding their operations. On the high end, Tarr said OneSource is probably the company's closest competitor, and he cited Hoover's broader market penetration, greater brand recognition, and much lower cost per year (a $20,000 entry cost for OneSource vs. $1,800 a year for Hoover's).

In its drive toward profitability, Hoover's is discontinuing non-core and unprofitable lines of business. The company has already eliminated its Hoover's Intelligence Monitor (HIM) and NewsStand services—decisions that were quietly announced in late July. Hoover's plans to further streamline its service offering by discontinuing the Travel and Careers portions of Hoover's Online, as well as a number of features targeted toward the individual investor.

Hoover's Intelligence Monitor was a product that evolved from the Hoover's Media Technologies unit, which was the new name for Powerize, a company that Hoover's purchased in August 2000. According to a company spokesperson, the vast majority of Powerize employees did not move to Austin when the Powerize offices in Maryland and Virginia were closed in March 2001. Buying Powerize did not prove to be a successful strategy. HIM had a robust technology but was very expensive to operate. As a result, the company wasn't gaining customers for the product as fast as it had hoped. The cost of licensing content for HIM also kept the subscription fee fairly high. Certainly, the serious downturn in the economy was a considerable factor in its rapid demise.

Continuing its slimming down of operations, Hoover's will be closing its office in London, which had just been opened in May 2000. Fourteen staffers will be let go in the closure. The press release euphemistically states that Hoover's is "modifying its approach to global opportunities in order to improve the financial performance of the company." What this means is it will handle international sales via the Web and phone from its Austin and New York offices. It also intends to pursue sales agency agreements. Russell Secker, former director of operations and finance in London, will be moving to Austin to head the company's international initiative and will serve as newly appointed vice president of product management.

The company has also reduced its overall staffing by 20 percent, going from about 275 employees to 220. According to the announcement, this was accomplished by a combination of reduction in staff, voluntary severance, and attrition. Savings will also be gained from other employee reductions. Tarr said: "We have also implemented changes in executive compensation plans to more tightly align total compensation with changes in responsibilities and company performance. We are hopeful that these actions will enable us to improve our top- and bottom-line results and advance us toward our goal of delivering net income profitability no later than the quarter ending March 31, 2002."

Several other management changes were also announced that more closely align responsibilities with the new focus and strategy. Jani Spede, formerly senior vice president and publisher of Hoover's Online, will serve as senior vice president of sales and marketing. Spede will continue to oversee advertising sales, but will now focus primarily on growing subscriptions. Carl Shepherd, formerly executive vice president of Hoover's Media Technologies, will serve as executive vice president of corporate strategy and development, and will also be responsible for the company's licensing business.

Some folks might not recall that Hoover's has roots as a print publisher. In 1990, Gary E. Hoover founded The Reference Press, Inc. The company published its first book, Hoover's Handbook 1991: Profiles of Over 500 Major Corporations, later that year. It then gradually moved to online publishing and distribution. In 1995 the company launched Hoover's Online, its Web site featuring both free advertiser-supported and for-pay premium access to Hoover's company information, as well as business news and other information. The company was renamed Hoover's, Inc. in 1996. In July 1999 Hoover's went public, trading on Nasdaq under the ticker symbol HOOV. Major investor partners include AOL Time Warner (which owns 17 percent) and Media General (which owns 16 percent).

Despite the cutbacks and belt-tightening measures, Tarr said Hoover's planned to add additional company coverage to the service, and that it's planning to provide new features and functionality to Hoover's Online. By focusing on a smaller market segment, the company may also have more opportunities open to it for distribution and licensing deals for other market segments. Hoover's offers a great information product. I hope its sharpened focus and new strategies prove successful.


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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