The Dialog Corporation (http://www.dialog.com) has acquired Responsive Database Services, Inc. (RDS) (http://www.rdsinc.com) for $2.85 million in cash and the remission of all outstanding debts to Dialog. RDS produces the business and social science databases Business and Industry, TableBase, Business & Management Practices, RDS Highlights, and Contemporary Women's Issues. Founded in 1994 by Dick Harris, former head of Predicasts (before Predicasts' sale to Information Access Company), RDS received substantial loans from Knight-Ridder Information, the former Dialog. As part of the agreement between the two organizations, The Dialog Corporation had the option to purchase RDS, an option it has now exercised.
RDS distributes its data through multiple channels and multiple formats, a policy Dick Harris expects to see continued. Derek Smith, executive vice president of The Dialog Corporation, commented, "Exercising the option to purchase RDS allows Dialog to leverage the business content for its own range of business, professional, and academic products, as well as licensing the data to other online services, providing the company with a significant source of potential income." RDS distributes its database on some 16 systems including DIALOG, DataStar, FT Profile, OCLC, NERAC, SilverPlatter, OneSource, Data Downlink, Northern Light, AOL, Excite, WebCrawler, et al. Harris considered the new management at Dialog to be more comfortable with a multiple channel policy than previous Dialog management. "They want us to pursue channels of distribution to keep the company growing and making an impact. The restraints from the original Dialog distribution agreement are no longer there. This opens up the way for us to even further broaden distribution. Expect to see some announcements from us in the next couple of months."
Harris has committed to remaining with RDS for at least one year following the Dialog purchase. He may stay longer. He will report to Derek Smith in the U.K. Harris said that he felt pretty good about the acquisition. "Dialog has always been a good partner for us. They know what I know how to do well. We've made this company profitable in a short period of time in a difficult type of business. RDS has a worldwide reputation for quality—heads up over our competitors—and a very premier position in the industry." Harris has some new databases on the drawing board, but all he would say about them is that they were new and innovative and that one fell in the social sciences and one in the sci-tech areas.
Though DIALOG still constitutes RDS' largest revenue channel, in recent years, alternative channels have multiplied and increased their percentage of RDS' revenues, with the new direct Web service (RDS Business Reference Suite) the fastest growing. Excluding revenues earned from Dialog, RDS revenues for 1997 were $3.1 million, up from $1.35 million in 1996. RDS had a net loss of $1.64 million during 1997 and a net deficit, as of December 31, 1997, of $3.95 million. Since January 1, 1998, RDS has generated sufficient cash inflow to fund all operations. The $2.85 million "goodwill" arising as a result of the transaction will be capitalized and amortized to the profit and loss account over a 20-year period.
Harris told us that he turned to Knight-Ridder Information in 1994 when he started the company, because in those days, KRI was investing in lots of information companies, e.g. Netscape; Yahoo; Individual, Inc.; PLS, etc. "We were one of the companies that raised money from them. Our deal was instead of equity as in other companies, we got loans, convertible into equity. We have been servicing the debt through the years, but this was a way to totally wipe out the debt and also transfer shares and money for $2.85 million on top of the debt payment."
RDS is located in Beachwood, OH, a suburb of Cleveland, and has over 50 people on staff in the United States. It also owns Responsive Database Services, Ltd. in the U.K.