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Hoover's Online: Cash Flow Positive And Ready To Make An Acquisition - Brief Article

Now that the company has reported its first positive net income as a public company last week, company executives say Hoover's Online is ready to reenter the merger and acquisition playing field.

"With over $31 million in cash on our balance sheet and growing, this raises the question of what do we intend to do with it," Jeffrey Tarr, president and chief executive officer told analysts during a conference call. "We are now in a position to begin to consider the possibility of a manageable acquisition and investments that would be accretive to earnings."

Beyond that, Tarr was tightlipped, declining to give any guidance on even the type of company Hoover's might be interested in buying.

Hoover's most recent acquisition, the $17 million buy of search and content management technology company Powerize.com in July 2000, hasn't brought the returns the company was hoping for when it made the deal.

Prompted by a Jupiter Communications forecast that stated the content syndication and licensing market would balloon from $343 million in 2000 to $1.5 billion in 2004, Hoover's made the purchase with the idea of expanding into that market.

A downturn in the economy, however, forced it to close its Hoover's Media Technology, formerly Powerize.com, offices in Reston, Va., and Linthicum, Md., last March and fold the unit into its Austin, Texas, operations.

At the end of the second quarter, ended Sept. 30, Hoover's announced that it was shutting down two of the products it had developed through Powerize, Hoover's Intelligence Monitor (HIM) and Newstand. The company has also since abandoned the idea of being a third party provider of search and syndication technologies.

Now that Hoover's is prepared to make another acquisition, it will likely look to acquire a company that can further its strategy of growing its corporate subscriber base. Unfortunately, unlike in 2000, the number of companies smaller than Hoover's that are still around in its space are few and far between.

Some of the most logical targets include privately owned Business.com, which, like Hoover's, offers a database of company profiles in addition to its directory service. Another bargain buy would be business services site Office.com, which has become a third wheel under the Winstar umbrella since Winstar was acquired by IDT Corp. in December. Office.com has been looking for a buyer since Winstar filed for bankruptcy last April.

Hoover's Slashes Expenses To Reach Black

Hoover's reached its profitability goal through improved subscription sales and a lot of belt tightening. The company reported net income of $122,000 on revenues of $7.9 million for the third quarter, ended Dec. 31, compared to a net loss of $6.1 million on revenues of $8.7 million in the year ago period. The revenue decline was due to advertising sales, which dropped from $3.5 million to $1.5 million. Subscription sales softened the blow, improving from $3.9 million to $5.3 million.

Hoover's added 326 accounts in the quarter to bring its total to 7,781. The question is, how long will Hoover's will be able to sustain that growth pace with a sales and marketing budget that is less than half what it was a year ago.

Operating costs were slashed, cut from $11.1 million in the year ago period to $5.6 million. Taking the brunt of those cuts were sales and marketing expenditures and general and administrative costs.

Tarr said the company will up its sales and marketing budget by 5% in the fourth quarter, ending March 31, but that's still well below what Hoover's used to spend. It's likely that Hoover's will pump some of its cash flow into its sales department to ensure that its two third quarter product launches, Hoover's One and Contact Pro don't end up like HIM and Newstand.

Contact Info: 512-374-4500 or www.hoovers.com