The Thomson Corporation once again demonstrated its magnetic pull as it announced the acquisition of NewsEdge on August 8, 2001. Following about three months of negotiation, the final deal has Infoblade Acquisitions Corporation, a Thomson subsidiary formed for the purpose of this transaction, making a cash tender offer for all the shares of NewsEdge common stock at a price of $2.30 a share. This makes the deal worth approximately $43 million. There is considerable backing for the acquisition from key shareholders. Beneficial owners Don McLagan, retired chairman and CEO of NewsEdge and former CEO of Desktop Data (which merged with Individual Inc. in 1997 to form NewsEdge in a deal valued at $84 million) and Basil Regan, who sits on the Board of Directors for NewsEdge, have already pledged their shares. When you combine this with the holdings of the company's officers and directors, close to 50% of the outstanding shares are committed to this tender offer.
For those who remember the abortive merger attempt in December 1999 between NewsEdge and RoweCom, structured as a share swap valued at $227 million, the news that this is a cash tender offer is a strong indication that this deal will go through, albeit with a vastly lower valuation. Plus, Thomson is a much stronger company than RoweCom, both in financial clout and pure size. RoweCom's own divine intervention, its acquisition for stock by Divine Inc. in early July 2001, was worth only $14 million. Divine had earlier acquired industry portal SageMaker and scooped up FractaNet the same week and the assets of Intira the week before Thomson grabbed NewsEdge. The Thomson acquisition is expected to be finalized in the fourth quarter.
NewsEdge is a $71 million provider of real-time and information products and services to approximately 1,500 corporations and professional service firms worldwide. Its headlines are also incorporated into several public Web sites. Less well understood is the NewsEdge content refinery, which does on-the-fly indexing of news stories streaming in. This electronic publishing component is used by companies such as Primedia to categorize content.
ALIGNING NEWSEDGE WITH DIALOG
Thomson plans to "align" NewsEdge with The Dialog Corporation, under its Legal & Regulatory group. What does "align" mean? According to NewsEdge's marketing vice president David Scott, it means that NewsEdge will be gradually integrated into Dialog. The companies will continue to be run separately, at least while the transition is in progress. As the transition progresses, customers can expect some joint offerings and cross-selling of NewsEdge, Dialog, and other Thomson products and services. Cliff Pollan, presently the CEO of NewsEdge, will remain as head of its management team, but will report to Dialog's CEO, Roy Martin. Other key NewsEdge personnel, such as Scott, will also stay.
As noted in the February/March 2001 EContent profile of NewsEdge ("On the Edge with NewsEdge," by Marydee Ojala, pp. 53-55), the business model is one of syndication and partnerships. Like Dialog, the company does not produce its own information. Rather, it distributes others' content. Concentration is on current awareness. This makes a nice fit with Dialog's archival electronic warehouses. Although some question how much end-users will appreciate having such a vast store of information sitting behind current headlines, Martin assured me that Dialog's market research team has found that people want just that.
CONTENT REFINERY
It's not just content, however. According to Dialog's Martin, the information refinery was a key aspect of the decision to acquire NewsEdge. "I had one of those ah-hah moments when I looked at NewsEdge. It's a great fit. The taxonomy elements of the company have great leverageability. Furthermore, NewsEdge's on-the-fly automation gives us an XML conversion module."
There had been the possibility a few years ago of adding taxonomy technology to Dialog, but when Thomson bought Dialog, the technology portion of the business stayed with Bright Station, now Smartlogik. At the same time, NewsEdge was having trouble developing its technology because, as Martin says, "it was hamstrung by finances."
NewsEdge's Cliff Pollan agrees. "I am really excited about what we can do with Thomson's resources. This will fulfill a NewsEdge vision and will be great for clients and employees."
Expanding on NewsEdge refinery technology, Pollan comments, "What our refinery does is determine what I like to call the DNA of the story. Now think about applying that to other types of documents, such as market research reports, or the materials Gale Group processes for its databases." The backend technology, as Pollan points out, has tremendous potential to enhance the indexing procedures of Thomson companies. "Stories come into NewsEdge in a variety of formats; they go out tagged and coded as XML documents. We know how to do this and, in fact, we already do it for some of the Thomson content that we now license."
NewsEdge products are frequently found within major corporations' intranets as tailored current awareness for industry trends and breaking news. Sometimes the service is included in extranets as well so that key customers and suppliers can share the information wealth. The acquisition by Thomson has not slowed NewsEdge's push into companies. In late August, NewsEdge announced a deal with Benfield Group, the largest privately-owned reinsurance intermediary in the world, to put risk management and financial services news on Benfield's intranet, extranet, and public Web site. NewsEdge is also deploying NewsEdge Live, NewsEdge Insight, and NewsEdge Editor's Picks into Berlex, the U.S. affiliate of German pharmaceutical company Schering AG–another announcement from late August.
MONOPOLY CONCERNS
Customers are likely to be concerned about the increasing hegemony of Thomson in the information industry. Is it approaching monopoly status? Will this concentration of information sources and technology in one company be beneficial or harmful to information consumers? Or, as one librarian commented to me in email, "Maybe we should just send our entire online budget to Thomson?" Martin is not worried. "This acquisition, if done properly, will enhance competition by bringing more products and services to customers." Well, what else would he say?
Yet Pollan reports that, in his initial meetings with customers and clients, the mood has been positive. "Even when both Dialog and NewsEdge have customers within the same institution, they tend to be in different departments. Dialog has the information professional; NewsEdge is on the desktop. As Dialog rolls out products to the desktop, NewsEdge's experience will be helpful. Customers realize this and seem excited about how the companies can leverage each others' strengths."
Thomson is now billing itself as an electronic information company. Having divested itself of its print newspapers, it is betting the farm on online. But from an information professional's viewpoint, the products and services that seem to fit together are scattered among various divisions. Dialog, NewsEdge, and West Group are in Legal & Regulatory; Gale Group is in Education; and Investext, Primark Global Access, Extel, and Securities Data are in Financial. When I asked Martin if any more rational grouping was being considered, he told me his crystal ball wasn't working.
IT'S A TOUGH MARKET OUT THERE
The for-fee current awareness market has been tough lately. According to Outsell, the market of "pure" news aggregators, which includes NewsEdge and other syndicators, is valued at about $190 million. However, this doesn't include companies with additional product lines, which Outsell groups into other categories.
With so many free Web sources for today's news, simply posting stories isn't enough. Competitors of NewsEdge, including Moreover Technologies, Comtex, Inlumen, ScreamingMedia, and Yellow Brix, are struggling to find the perfect answer. Companies that combine current news with archival data, including Factiva and LexisNexis, compete with Dialog both in the pay-as-you-go and enterprise-wide markets. Factiva's partnership with InXight to provide automatic indexing and taxonomic enhancements and LexisNexis' recent purchase of iPhrase clearly demonstrate the importance of behind-the-scenes analysis of documents. Leveraging NewsEdge's content refinery and backing up current news with archives may just be the magic bullet needed for Thomson's success.
Marydee Ojala (marydee@xmission.com) is Editor, ONLINE, and Editor-at-Large, EContent.
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