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Rogues' gallery: The new owners and management team running MediaCommand Inc. (formerly Geac Publishing Systems) include, from the left, Robert Banner, Bernard Grinberg and Phil Lowe. Far right is Briggs Kilborne, the new vice president of the newspaper/new media division of MediaSpan Group Inc. (formerly Harris Publishing Systems Corp. and Baseview Products Inc.)
New owners put Geac, Harris
onto firmer ground -- alone
It was an open secret in the industry: Suppliers for sale? Sure -- Geac and Harris were both on the block.
Interestingly, these two businesses shared some qualities: They were the unloved divisions of much larger corporations; they were in the process of attempting to integrate product lines between subsidiaries, and they were run by people whose ambitions for the divisions were being thwarted by their corporate overseers.
The rescuers of these companies were alike as well: venture capitalists who had stepped back from the Internet meltdown to see where money might be more profitably invested.
And the managements of both companies came out after they were acquired with broad hints that they, too, were now on the prowl for more publishing systems suppliers to bring into their new collections of businesses.
Some in the newspaper industry immediately came to the conclusion that the slack sales period that started at the first of the year was a contributing factor in the changes of ownership, but the fates of both businesses were sealed long before this summer.
Though neither company has sold well in the United States in recent months, management at the top of Geac and Harris probably never even knew that there had been a slowdown in newspaper system sales. They were focused on bigger issues.
Here are the stories of how Geac Publishing Systems and Harris Publishing Systems Corp. came to be -- and came to be for sale -- and how their managers believe they will be operated now that they've been sold.
The Canadian connection
The business known as Geac Publishing Systems was really the amalgam of four previous businesses: Collier-Jackson, Cybergraphic, Gazette Technologies and Matrix.
Geac Computer Corp. Ltd. of suburban Toronto has had a colorful history. It was a high-flying Canadian computer services company in the 1980s, but by the middle of the decade, it went bankrupt.
But it returned in the 1990s, and in June 1994, Geac bought Collier-Jackson, founded in 1975, from CompuServe (yes, the on-line service). Collier-Jackson had specialized in a variety of newspaper business software packages, including accounting packages, circulation software and newsprint inventory, that ran on Digital Equipment Corp. or Hewlett-Packard minicomputers. In the 1970s and 1980s, C-J had become the de facto standard in business applications.
In 1999, Geac brought in a new, young chief executive, Douglas Bergeron, whose vision was to focus on niche markets, including libraries, banks, hotels, and police and fire dispatch operations.
His process was to acquire companies.
Looking around at the divisions the company already had, Bergeron noticed the former Collier-Jackson business. He began scouting out potential acquisitions in other facets of the newspaper industry.
Cybergraphic Systems Ltd., of Melbourne, Australia, had been troubled for years. Its founder had squandered political capital in the United States by installing systems that did not work. After he was ousted by his board of directors, the new management team had a difficult time making the transition from suppliers of proprietary systems to suppliers of off-the-shelf systems.
Though Cybergraphic, which provided editorial and advertising front-end and pagination systems, had always done well in Australia, its performance in the United States was lackluster. In the late 1990s, there was an abortive effort to team up with System Integrators. Through a series of missteps, Cybergraphic went into the hands of bankers; it was sold to Geac in June 1999.
Just before the acquisition, Cybergraphic had cut a deal with a new, small circulation software provider from the United Kingdom, Matrix Publishing Systems Ltd., to market Matrix's products in Asia-Pacific. The relationship piqued Bergeron's interest, and just weeks following the Cybergraphic purchase, Geac bought Matrix as well.
In May 2000, Geac acquired Gazette Technologies, a division of Gazette Communications Inc., of Cedar Rapids, Iowa, publishers of The Gazette in that city. Gazette had developed a data warehousing product called MarketInfo that had been gaining acceptance in the newspaper industry.
Then, amidst flagging sales and large debt, Douglas Bergeron resigned as president and chief executive officer of Geac in October 2000. When the board of directors looked at what the company had become, they were horrified -- and two interim chief executives quickly followed Bergeron.
The company lost C$256 million (US$165.6 million) last fiscal year. It has cut 26 percent of its worldwide work force (1350 people) and in recent months, Geac has restructured its debt and is making its way out of the problems created by the acquisition spree -- but it was clear, both inside and outside the company, that the publishing systems division had to go.
Former Cybergraphic and Matrix executives had been running Geac for almost a year, but without a steady hand in Toronto, they couldn't accomplish much.
Phil Lowe, the founder of Matrix, did know people in the U.K. venture capital business, and they put him in touch with a venture capitalist who had 30 years of experience in workouts and refinances. Robert Banner, the venture capitalist, took a look at the Geac Publishing Systems business and liked what he saw.
He, Lowe and the other Geac manager, former Cybergraphic Managing Director Bernard Grinberg, started a Delaware-chartered company called MediaCommand Inc., which made an offer for the Geac division. It was accepted. Geac sent out a press release in early August saying that MediaCommand had purchased the division for C$1.5 million (US$974,000) and that the transaction included real estate assets.
While this number may seem awfully low, debts and obligations probably put the transaction at closer to US$25 million.
Banner, a former accountant with Kpmg, is straightforward about what he knows about the newspaper industry: nothing.
"I do not purport to be and I do not intend to be an expert on the news industry," Banner said from London in a conference call that included Lowe in the south of France and Grinberg in Australia. "What I bring to the party is something else."
It's clear that the "something else" is a no-nonsense look at business. Banner calls himself a "financial engineer," and this was among his first observations: "When we went into this transaction, we made the assumption we were buying into difficult times."
Banner seems to have an uncanny sense of difficult times. The Australian native sold a software business in England in the mid-1990s because "post-Y2k would be a different arena than prior to the year 2000... I had a particularly clear vision of what the wasteland would be."
He took the proceeds of that sale and put it "where we felt it would be safe -- in the bank." Now he is investing the money in MediaCommand.
Banner intends to defer to Lowe, who is MediaCommand's chief executive officer and chief operating office for Europe and the Americas, and Grinberg, who is the company's president and chief operating officer for Asia-Pacific, in the arena of product development and dealing with customers.
Banner will be the new company's chief financial officer, and he does seem to understand the economics of the supplier industry.
"One of the attractions of this business is that you have the maintenance base," he said. "That means that every morning when you get up, you have a large amount of your total revenues booked."
That doesn't mean that Lowe or Grinberg have problems understanding business fundamentals, though.
"I think one of the advantages we have is that we probably have a wider range of activities and products, as well as geographic advantages," said Lowe. "There will be times there will be good activity in the circulation area when editorial doesn't have that kind of activity."
"We're not expecting miracles," said Grinberg. "We're not expecting to capture 100 new customers a year. We're restoring these businesses to the good working order they were in previous to the acquisitions."
The new managers of MediaCommand acknowledged that the first thing they did upon taking over the business was to institute layoffs -- about 13 people were let go in the Tampa, Fla., offices, while about half that number left the Melbourne, Australia, offices.
But they did deny that they planned to close the Tampa office. "I live in Tampa and I'm staying there," said Lowe. He did say that he was scouting out new offices, because the existing building was in the city's "lapdance district."
But can Banner bail the company out if it hits some unforeseen rough times? "Yes, for a period of time," Banner said. "Geac probably thought they had enough money, until their bankers said stop.
"Fortunately, we're not in the hands of bankers."
Harris harassment
For the better part of the late 1980s, Harris Composition (as it was then called) had to live down its reputation for leaving the newspaper industry.
Harris had provided many newspapers, including the New York Times, their first-generation editorial front-end systems. Then, in the late 1970s, the company elected to leave the market.
It returned, though, a few years later with a display ad makeup terminal, and it built a business around the functionality of that device.
The ad terminal morphed into a pagination terminal, which got an editorial front-end grafted onto it. The division found some technology at a sibling group that specialized in military applications, and that technology eventually became the heart of the company's XP21, the database of the NewsMaker editorial and pagination system.
But the division never got respect from Harris. For a long time, in fact, the newspaper systems' business was married to a business that built control systems for electricity distribution. Even after the division became a stand-alone, there was a group of people in the division who, in effect, moonlighted selling systems to law enforcement agencies.
It is alleged that Harris prefers that all divisions have a gross of more than $50 million annually. The division would have had to almost double its income to make that cutoff line.
In 1995, Harris purchased Baseview Products Inc., a small supplier of Macintosh-based editorial, classified and circulation systems based in Ann Arbor, Mich. It was hoped that the combination of the two businesses (which was renamed Harris Publishing Systems Corp., or HPSC) would spark more sales, and that the combined annual sales would total more than $50 million.
It never happened.
Harris moved a number of executives from other portions of the company through the division in an attempt to figure out a way to either make the thing break the $50 million mark or to sell it. They couldn't do it.
Then the company brought in a publishing systems industry veteran.
He couldn't do it either.
Another Harris veteran took over, and he brought with him a company marketing executive named Briggs Kilborne. The two of them almost put together a number of different deals to sell the division over the last couple of years.
Then, this summer, Kilborne found his benefactors.
A group of investment funds had bankrolled the ramping up of KOZ Inc. KOZ, founded in 1995 by Harry Bailes in Greensboro, N.C., has had a lively history. Frank Daniels III, the former executive editor of the News & Observer in Raleigh, N.C., was once chairman and chief executive. KOZ created a number of community publishing modules for newspaper web sites, and was one of the first application service providers (ASPs) in the industry.
But as the bottom fell out of the Internet world, the bottom fell out of KOZ. Last spring, a last-ditch effort was made to fix the company by bringing in Steve Vetter, a North Carolina technology executive who had once been vice president of finance and planning for ABC Consumer Magazines in New York.
Vetter was unable to stanch the flow of red ink, and KOZ went into bankruptcy shortly after his arrival.
In an interesting twist of fate, some of the original investors in KOZ -- including Southeast Interactive Technology Fund of nearby Morrisville and Barnard & Co. of New York -- ended up buying the assets of KOZ at bankruptcy proceedings in July. Other backers include Rustic Canyon Ventures of Santa Monica, Calif., founded by members of the Chandler family, former owners of Times Mirror Co. of Los Angeles. Rustic Canyon is run by Thomas Unterman, the executive who engineered the sale of Times Mirror to Tribune Co.
This group dubbed itself Community Software Acquisition Corp. and concurrent with the KOZ acquisition, it purchased the assets of NextAudio, another North Carolina new media technology company that provides streaming audio services for radio stations. NextAudio had gone into bankruptcy in March and, according to the News & Observer, on April 17 asked the court to allow it to receive post-filing financing from a company called KOZ.com; KOZ filed for bankruptcy on April 30.
Community Software Acquisition Corp. acquired Harris Publishing Systems Corp. and its wholly-owned subsidiary Baseview Products Inc. on Aug. 15. At month's end, it became MediaSpan Group Inc. of Durham.
Why would MediaSpan want Harris and Baseview?
"A lot of our technologies revolved around the new technology initiatives," said Vetter, who is now chief executive of MediaSpan. "What we decided was to go back into some of the mission-critical aspects of running newspaper operations."
Sources indicated that MediaSpan was still in the acquisition mode and that it had its eye on another company with radio connections. Therefore, it's clear that MediaSpan's bet is on convergence.
"We believe in the value of the convergence theory," said Vetter. "We already had some customers in the radio industry, and we have been working to tailor our technology to that industry. We intend to move out into the other broadcast arenas as well."
Kilborne, who is now president of MediaSpan's newspaper/new media division, kept using the word "excited."
"We're very excited," he said. "We're now with a group that is there to fund our growth opportunities."
Later on he said that MediaSpan was "very excited about the opportunity and that we have some products that they believe are the future of the industry."
Not quite as excited were the reported 30 Harris employees at the Melbourne, Fla., headquarters and the 30 Baseview employees in Ann Arbor who received pink slips Monday, Aug. 20. While Kilborne wouldn't confirm the layoffs, he did say "there were some people on Monday who didn't make the transition."
In an official statement, the company said, "Any staff reductions were aimed at eliminating duplicate positions created by the acquisition. Under Harris Corp., HPSC and Baseview maintained separate business and administrative operations. Those operations are being consolidated under MediaSpan."
Kilborne and the company refused to say how many employees used to work or now work at either HPSC or Baseview; it is estimated there are now 140 workers total between the two businesses.
Interestingly, Harris has retained a minority position in the companies, which will continue to be called Harris Publishing Systems Corp. and Baseview Products Inc. HPSC said in a statement that offices would continue to remain in Melbourne and Ann Arbor, though HPSC may find quarters off the Harris campus.
What's it all mean?
Both Geac and Harris have been hobbled by their ties to their corporate parents in the past. Not only have Harris and Geac executives acknowledged this -- both sets of managers hinted that, in fact, now that they are unfettered they are getting customer interest they never had before -- but it has been clear over the last year speaking with publishers that the "little division in a big company" situation spooked them.
So, from that perspective, both companies automatically benefit from the acquisitions.
However, HPSC and Baseview are at the mercy of investment funds that have a history of allowing their businesses to go bankrupt. Also, while the Baseview product line remains strong, HPSC is shifting its editorial systems over to Jazshak, which has had spotty acceptance.
But that's not to say things are all rosy for MediaCommand, either -- it faces a hostile group of Collier-Jackson customers, who are aggravated at Geac's long-term lack of interest in further developing the C-J product line, and a long history of the North American lack of interest in its Cybergraphic editorial, advertising and pagination products.
Further, the most likely customers for either Matrix or MarketInfo are probably existing Collier-Jackson customers -- who are probably not in the mood to do business with MediaCommand.
Yet, it's clear that Lowe and Grinberg will have a degree of control over the future of the business that their counterparts at Harris won't have.
About the only thing for sure about MediaCommand or HPSC/Baseview is that they're not for sale.
This week, anyway.
-- dmc
"I think it's literally that we see the same customer base wanting more products, more solutions through a single vendor type of approach. To the extent those capabilities are integrated, it's more of a plus from the user standpoint."
-- Steve Vetter, chief executive of MediaSpan Group Inc., commenting on the product overlaps between KOZ and Baseview.
Harris Publishing sSystems Corp.,
(321) 242-5330,
e-mail: HPSCmktg@harris.com;
MediaCommand Inc.,
(813) 872-9990,
e-mail: vsinfo@geac.com;
MediaSpan Group Inc.,
(919) 767-2108,
e-mail: info@mediaspangroup.com
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