DoubleClick's Restructuring Not Yet Over

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DoubleClick Inc. spent much of the past quarter realigning its business and jettisoning unprofitable divisions in an effort to trudge toward profitability. Judging from its fourth-quarter and full-year 2001 earnings, however, plenty of work remains.


The company's total revenue for 2001 fell to $405.6 million, from $505.6 million for 2000. Revenue for the fourth quarter fell to $96.1 million, from $132.3 million in the same quarter a year earlier.


It also reported a net loss of $265.8 million for 2001, or $2.02 per share, compared with a net loss of $155.9 million in 2000, or $1.29 per share. For fourth-quarter 2001, the company said, its net loss was just over $64 million, or 48 cents per share, compared with a net loss of $104.7 million, or 85 cents per share, in the previous fourth quarter.


One bright spot among the company's businesses was technology. DoubleClick said revenue for its TechSolutions division rose to $206.9 million, from $203.4 million a year earlier. For the fourth quarter, however, TechSolutions revenue fell to $51.7 million, from $61.5 million in 2000. DoubleClick's DART and e-mail platforms delivered 172 billion impressions in fourth-quarter 2001, and the company added 54 clients.


Another bright spot was the Data division, which reported 2001 revenue of $81.3 million, up from $72.3 million in 2000. In the fourth quarter, the Data division posted revenue of $19.6 million, up from $17.8 million a year earlier.


Its Global Media revenue declined in 2001 to $129.3 million, from $253.8 million a year earlier. Fourth-quarter Global Media revenue fell to $27.2 million, from $60.4 million in fourth-quarter 2000. The quarter's results include revenue from DoubleClick's European media business, which the company sold in November 2001 for $26.9 million to German online advertising and marketing firm AdLINK Internet Media AG. The German company's shareholders approved the acquisition Jan. 3.


AdLINK also signed an exclusive 10-year deal to use DoubleClick's DART ad-serving platform. The company previously used Engage Inc.'s ad-serving technology.


Meanwhile, some industry observers had speculated when DoubleClick discontinued its Intelligent Targeting service last month that the move was a prelude to the company abandoning its U.S. media business. The Intelligent Targeting technology let marketers target ads based on a Web surfer's browsing habits.


Those observers said the company would leave the media business altogether because it was a drag on DoubleClick's bottom line. They cited the company's moves to bolster its technology offerings. In October 2001, it bought the technology assets of marketing firm L90 Inc., Los Angeles, for a rumored $20 million.


They also noted the turmoil in DoubleClick's Global Media operations. Global Media president Barry Salzman resigned in November 2001 and left the company in December. In October, DoubleClick eliminated about 20 of its 88 Global Media positions to cut costs. For the full year, the company reduced its head count 25 percent, to 1,450 employees, from 1,929.


But Global Media's restructuring is far from complete. On Jan. 15, DoubleClick announced the establishment of an online direct marketing division called DoubleClick Direct, which will provide full-service online direct marketing and customer acquisition services.


The 10-person group hopes to better integrate online and offline marketing services for direct marketers. Some see the move as an admission by DoubleClick that in these economic times online branding efforts cannot easily be turned into a quantifiable return on investment. DoubleClick and some large ad sellers long have pushed the notion that online marketing was best accomplished with branding as the goal. But increasingly, advertisers are looking to better quantify their ROI. DoubleClick hopes to capitalize on this trend with its Direct division, which will focus on promoting Web inventory, e-mail and list rental to DMers.


The Direct division, which is part of the Global Media group, is headed by Bill Wise, vice president of business development. He will report to Jeffrey Silverman, vice president and general manager of DoubleClick North America Media. Clients of the division include Capital One, Sprint and Columbia House.


Still, analysts see hope in DoubleClick's latest financial performance. Despite the company's lower revenue and income, it lost less than analysts had forecast. They also note that the restructuring of its media business may not be over.


"Results in the Media division, which include divested European operations, were better than expected," said Brad Eichler, an analyst with Stephens Inc. "[DoubleClick's] head count has been reduced dramatically and operations are nearing breakeven, but we believe management continues to entertain strategic opportunities that could include further divestitures."


DoubleClick, too, hopes these moves soon bear fruit in the form of increased revenue. For first-quarter 2002, the company expects total revenue of $82 million to $87 million. Revenue is expected to be $49.5 million to $51.5 million for TechSolutions, $17 million to $19 million for Data and $16 million to $18 million for Global Media.


DoubleClick noted that e-mail technology within its TechSolutions division is expected to generate revenue of $9.5 million to $10.5 million in the first quarter.


For the full year 2002, the company expects total revenue of $330 million to $400 million. About 62 percent of that is expected to come from its TechSolutions business, with 15 percentage points coming from e-mail and 47 percentage points from ad management. DoubleClick's Data division is expected to contribute 22 percent to the company's total 2002 revenue, and its Global Media business is expected to account for 16 percent.


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