Talk about reshaping a company. Seven years ago, VNU NV was a sleepy Dutch purveyor of content, through its ownership of newspapers and television stations in the Netherlands and an array of magazines across Europe. But as it watched its leading Dutch rivals, Elsevier and Wolters Kluwer, embark on global expansion programs, VNU worried that it would fall behind.
"We were not as advanced as they were," VNU's chief financial officer, Frans Cremers, recalled. "We were the ugly duckling."
PHOTO: NY TIMES
The transformation has been striking.
Through acquisitions totaling more than US$8 billion since 1994, VNU has turned itself into a leading provider of information about the media and consumers for use by media companies and advertisers. And many of its key assets are in the US. VNU now has 145 trade newspapers and magazines including
VNU also owns and operates more than 90 trade shows around the world each year, and it publishes or has stakes in ad-supported telephone directories in Europe and Latin America.
The idea, VNU executives said, is to escape the vagaries of consumer advertising by offering businesses the types of information and services that remain in demand regardless of the economic cycle.
VNU's business is "business intelligence and business tools," said Gerald Hobbs, chairman and chief executive of VNU USA.
Hobbs, who joined VNU when it bought BPI Inc, the parent of Billboard, in 1994, now oversees the company's US operations, which this year could represent slightly more than half of VNU's revenue of 4.7 billion euros (US$$4.21 billion), said Nicola Stewart, who follows VNU for Commerzbank. As recently as 1994, 90 percent of the company's revenue came from the Netherlands.
Although VNU still has its headquarters in Haarlem, Netherlands, its chief executive, Robert van den Bergh, spends about a week a month in the US.
"I am trying to build a really, truly international company, a company that has its people spread around the world," he said. "That is where the future of big companies is, being really international."
Even so, some analysts are skeptical about the ability of management to oversee its far-flung holdings.
"The bet on VNU is that they can make all these deals work and integrate these companies," said Michael Nathanson, who follows overseas media companies for Sanford Bernstein & Co. "The issue is that they have no proven expertise in these various industries and they are operating in a wide variety of countries."
Van den Bergh acknowledges the enormity of the task. "I am not afraid to say loudly that it is a challenge," he said. "Affinity is easy to talk about, but difficult to organize. Our main goal is that every division makes its own money and has its own goals."
At least one insider, Michael Shallet, says that VNU has taken the right approach. Shallet, who was a founder of Soundscan and is now its president, recalled a meeting of senior managers that VNU convened last September in Cannes, France.
"I remember thinking that they are like a quilt of federated states," said Shallet, who sold 60 percent of Soundscan to VNU in 1998 and the rest this year, for undisclosed sums. "VNU is very hands off, and they were not the kind of people who tried to inject a corporate culture here. But they were very clear on their overall goals on how the company should operate and earnings growth."
Soundscan is part of VNU's largest unit, the marketing and media information division, which includes Nielsen Media, acquired two years ago for US$2.5 billion, and AC Nielsen, for which VNU paid US$2.5 billion earlier this year.
As their names suggest, Nielsen Media and AC Nielsen were previously part of the same company, which was acquired by Dun & Bradstreet in 1987. Then in 1995, when Dun & Bradstreet split itself into three publicly traded companies, they were separated.
For VNU, the appeal of owning both Nielsen businesses rests in their relatively predictable revenue structure. Typically, clients sign long-term agreements, sometimes as long as five years, to receive the data.
AC Nielsen receives two-thirds of its revenue abroad, from clients, including Nestle and Coca-Cola, that want data on TV ratings and on packaged goods sales. Nielsen Media's revenue, meanwhile, is virtually all from clients in the US -- broadcasters and advertisers intent on knowing how many people are watching which television programs at what time.
John A. Dimling, chief executive of Nielsen Media Research, noted that the tradition of AC Nielsen's focusing on the foreign markets predates the Dun & Bradstreet period. But he said the two Nielsen units now hoped to reinforce each other -- perhaps with AC Nielsen's adopting Nielsen Media's "more sophisticated" TV metering technology, while the two combine point-of-sale data with TV audience data in the US and abroad.
Steve Schmidt, AC Nielsen's president for the Americas, predicts that such collaboration will help consumer packaged-goods companies better understand their customers.
"You can have two shows with a five rating, but the demographic profile of the viewers might be very different," Schmidt noted. "AC Nielsen does a separate survey of consumer behavior in a wide number of households. If you apply that data to the data about viewers watching a program, you can help consumer packaged-goods companies target their media spending to better reach their group."
Jon Swallen, senior vice president and co-director for media knowledge at McCann-Erickson, praises VNU for reuniting the two Nielsens because the move "has lowered the walls between market research people and the TV audience research people."
"But VNU is late into the game," Swallen said. "It is a field that is pretty well established. Unilever, Procter & Gamble and others have already invested a lot into this research." And there has already been a setback. The retailing giant Wal-Mart has decided to stop providing data on sales of products to AC Nielsen, to keep the information research proprietary. "Wal-Mart's pullback is clearly a disappointment," Hobbs said. "In the short run, it is not a significant impact. But in the long term, it is hard to tell."
It may take time and effort to evaluate the payoff of VNU's acquisition binge. Investors, for now, seem skeptical. VNU's stock, which trades over-the-counter in the US, has fallen from a 52-week high of US$54.50 on Sept. 7, last year, to a close of US$34.07 last Friday.
Some analysts also complain that the company's financial data can be hard to sort out.
The most recent VNU financial figures were released in March 2001 and covered the full last year. VNU reported revenue of 3.38 billion euros (US$3.02 billion), a 20 percent increase from the previous year. Only in a footnote did the company indicate that 6 percent of revenue growth came from acquisitions and divestitures and 4 percent from currency transactions.
As Nathanson noted, "When a company is as acquisitive as they are, it is important to figure out what is organic revenue growth, by division, through the years." But Cremers, the chief financial officer, says the company has never provided anything but accurate numbers in its transformation from ugly duckling to swan.
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