ChoicePoint to Divest Three Units
Industry insiders and analysts offered mixed opinions earlier this week after learning that d ata provider ChoicePoint Inc. will sell its direct marketing, forensic DNA and shareholder services businesses.
ChoicePoint, which collects data on individuals, including Social Security numbers, real estate holdings and current and former addresses, made the announcement on July 10. The company also offers businesses, government agencies and nonprofit organizations software technology and information designed to anticipate and respond to economic and physical risk, and analyzes information for the insurance sector, and holds about 19 billion records.
Alpharetta GA-based ChoicePoint said it would sell ChoicePoint Precision Marketing , the direct marketing services division, which has 671 employees in Alpharetta, GA.; Peoria, IL; EL Paso, TX; Las Cruces, NM; Pensacola, FL; Andover, MA; and Durham, NC.
ChoicePoint said it was selling the businesses as part of a companywide strategic review, and that it will continue normal operations at the affected businesses until they are sold. The company did not provide a deadline for completing these divestitures and said the process is ongoing and is expected to continue throughout 2006.
Kevin Hillstrom, a database marketing author and founder of www.minethatdata.com said the move is a good one, especially since ChoicePoint's direct marketing division has experienced decreasing revenue since 2002, and during the past four years, competitors like Harte-Hanks have increased their sales.
"This division generates profit at a rate that is lower than the other business units that ChoicePoint reports on," he said. "[In addition], ChoicePoint commented in 2003 that they were experiencing softness for their print-based services. Given these facts, and the shift in overall marketing from print to multi-channel campaigns and online campaigns, it would probably be much tougher for ChoicePoint to compete against Acxiom, KnowledgeBase and Harte-Hanks."
Mr. Hillstrom added: " It may make sense to sell at this time, while the division is still profitable and attractive to a buyer."
ChoicePoint has made several changes to the way it does business since thieves accessed its massive database of consumer information in 2004. In January, ChoicePoint agreed to pay $15 million to settle Federal Trade Commission charges related to allegations the company's security and record-handling procedures violated consumers' privacy rights during the breach.
The data breach involved thieves posing as small business customers who gained access to ChoicePoint's database, possibly compromising the personal information of 163,000 Americans, according to the FTC.
The company discovered the breach more than four months before disclosing it to the public in February 2005. ChoicePoint has said authorities initially asked it to keep the information secret.
Another investigation of its top two executives by the Securities and Exchange Commission related to stock sales continues.
One analyst said that the businesses being divested, however, do not elate to the data breach.
"ChoicePoint will continue in other businesses that traffic in personal data and that will continue to require appropriate administrative, technical, and physical safeguards," said Robert Gelman, a privacy and information policy consultant based in Washington, DC, and a DM news contributor. " In fact, it sounds as if the company is concentrating on its lines of business that are more intensively based on personal data." ChoicePoint also said on July 10 that it would revise the segments in which it reports its financial results.
Based on these reporting changes and recent trends, ChoicePoint said it expects internal revenue growth from continuing operations for the second quarter to be modestly higher than the first quarter of 2006 and in the mid-single digit range.
This news brought concern to Wall Street, however, with analysts stating that the new figures suggest lower-than-expected results for the second quarter, excluding the businesses to be sold. They also raised concerns about the rest of the year and beyond. As a result, the company's stock price tumbled on Tuesday to its lowest level in more than a year. The company releases its second quarter results on July 20.