Is This the Shakeout?
by David M. Cole
Where
are our vendors going?
Over the past 10 months, organizational and business changes have swept the newspaper-supplier community—specifically the pre-press and new-media suppliers. A short list:
- Agile Enterprises Inc. of Nashua, N.H., was acquired late last year by Applied Graphics Technologies Inc. of Rochester, N.Y. Though Agile is now a standalone division of AGT, AGT management is probably influencing the direction of product development.
- Zip2 Corp. of Mountain View, Calif., providers of newspaper-centric e-commerce and online Yellow Pages software, announced in February that it would be acquired by AltaVista Co., a wholly owned subsidiary of Compaq Computer Corp. (AltaVista is now itself in the process of being sold to CMGI for $2.3 billion.) Some Zip2 customers worry the company has lost focus and are looking elsewhere for services.
- PrePress Solutions Inc. of Billerica, Mass., was acquired in April by the same investment group that owns Monotype Systems Inc. and Freedom System Integrators. Shortly thereafter, the company entered into Chapter 11 bankruptcy, and its longtime president was removed. In May, with the permission of the Chapter 11 creditors committee, PrePress named Monotype as its exclusive sales, marketing and support agent. In early June, a new management team secured a line of credit from Greyrock Capital, and at NEXPO®99, PrePress products were shown in the Monotype booth.
- Cybergraphic System Ltd. of Melbourne, Australia, was acquired in June by Geac Computers Ltd. of Markham, Ontario, for just under $11 million. Geac, which had already purchased the former Collier-Jackson business-software company in the mid-'90s and named the Tampa company Geac Publishing Systems, has given every indication that it wants to roll all of Cybergraphic's U.S. business into its own, shutting down the U.S. office in Burlington, Vt., and laying off numerous employees. It is an open question whether a supplier with little experience in the world of pre-press products will be able to market the Cybergraphic product line—which has had a rough time of it here anyway—in North America.
- Harlequin Inc., a British maker of raster-image-processor technology, announced in July that it had entered into the U.K.'s "administrative receivership." A transfer of ownership to Global Graphics of Pompey, France, was completed six days after Harlequin was forced into receivership; the transaction was valued at $18.4 million. The name Harlequin might not mean much to you, but it provides the core RIP technology for a variety of imagesetting companies, including Autologic Information International and ECRM. Again, the new owner has little experience in electronic pre-press.
- The TEAMS business unit of Thomson Corp. was spun off as a standalone business called Artesia Technologies Inc. of Rockville, Md., in late June. The new company was funded with venture capital from Warburg Pincus Ventures. Thomson executives declined to discuss the transition.
- FutureTense Inc. of Acton, Mass., announced in July that it would merge with Burlington, Mass.-based Open Market Inc., a provider of Internet-commerce software; the deal was valued at $125 million. Though this was a friendly merger—FutureTense CEO Ron Matros will become Open Market's chief operating officer—FutureTense customers should strive to stay informed about the merged company's long-term strategy.
Throw in recent top-management changes—new CEOs at both Cascade Systems Inc. and Atex Media Solutions Inc. (see p. 26)—and System Integrators Inc. being purchased by a venture capitalist, and you've got a lot stirring the pot here. (And there are a couple of other deals waiting in the wings. They're just not solid enough to write about yet.)
Though there is probably no single cause to all these events, there is little question they represent part of a shakeout expected 24-to-36 months ago—the proprietary-to-open shakeout.
We newspaper-industry pundits were certain consolidations and mergers would follow when suppliers transitioned from companies that captured profit margins on everything they sold—remember, proprietary VDTs cost $10,000 in the mid-'80s—to companies that sold only software and services.
And though there was some consolidation and turmoil (remember Dewar Information Systems? Sysdeco? DuPont?), the watershed we expected didn't happen in the mid-'90s.
But now, with the end of Year 2000 fixes in sight, many suppliers are hunkering down for a long, cold early part of the century. Many newspapers have bought all the pre-press systems and equipment they're going to buy for the foreseeable future. Many more will integrate on their own.
Would it be too disingenuous to say that our suppliers are going to hell in a handbasket? Yes—but it would be safe to say that there will be more consolidation and a smaller pool of established suppliers from which to choose.
Cole is a San Francisco-based newspaper consultant and editor of The Cole Papers, a monthly newsletter on technology, journalism and publishing. E-mail, dmc@colegroup.com; phone, (650) 994-2100; fax, (650) 994-2108. The opinions expressed are those of the author and not necessarily TechNews or NAA.