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CMP buy sets Miller Freeman on new path

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Miller Freeman is poised to become a powerhouse in the U.S. high-tech information field with the purchase of CMP Media by its parent, London-based United News & Media, late last month.

The $920 million cash deal will create a combined company with more than 300 publications, 480 trade shows and conferences, 250 Web sites and revenue approaching $1.5 billion. In addition, it creates a company that can challenge tech publishers International Data Group and Ziff-Davis for business-to-business marketers' dollars.

"It definitely takes Miller Freeman out of the second tier of publishing and their niche publication identity, [and] places them at the fore of delivering technology information to marketers," said Ellen Freeman, president of Carat Freeman, a tech media agency in Newton, Mass.

Marketing advantages

Miller Freeman and CMP characterize the pending deal, announced April 29, as offering both entities marketing advantages.

"Miller Freeman complements us terrifically in terms of product and in terms of market segment," said Michael Leeds, CMP's president-CEO. "We're strong in magazines and on the Internet. They are a world leader in exhibitions and trade shows and niche publications."

San Francisco-based Miller Freeman, which plans to maintain CMP's headquarters in Manhasset, N.Y., values CMP's credibility so highly that it plans to group its own niche tech publications, such as Dr. Dobb's Journal, Computer Telephony and Embedded Systems Programming, under the CMP brand name.

"CMP tends to have the horizontal publications serving the IT market, while Miller Freeman has the strong verticals," said Joel Novak, managing partner of Veronis, Suhler & Associates, New York. "However, Miller Freeman has strong horizontal trade shows, of which PC Expo is the largest."

A combination of PC Expo with CMP's InformationWeek, for example, could provide benefits for both.

Ms. Freeman pointed out that the acquisition of CMP by Miller Freeman would allow marketers to use a single source for niche marketing and their broad information technology marketing.

Financially, the centerpiece of this acquisition may be CMPnet, the Web portal that includes TechWeb, the EDTN Network and Channel Web. Miller Freeman made no secret that it would consider outside funding for the online business before the year is over, including a possible initial public offering of CMPnet.

"That is something that is almost automatic," Reed Phillips, managing partner of media investment banker DeSilva & Phillips, New York, said of the possibility of an Internet IPO.

The model for a tech publishing Internet IPO is Ziff-Davis. The company raised $200 million in March through a tracking stock IPO for ZDNet, its online business division. ZDNet now has a market capitalization of nearly $2.6 billion.

"They're absolutely following ZDNet," said Michael LeConey, an Internet analyst with Security Capital Trading, New York. Without the potential Internet value, CMP's print publications would have been less attractive to a buyer, he said. "Without the Internet, CMP would have been lucky to get $400 [million] or $500 million."

While many observers think an IPO is a foregone conclusion, what fate awaits CMP's print publications and the tech publishing market overall is less clear. As tech ad pages continue their decline -- according to Adscope, overall pages declined nearly 14% in the first quarter from the year-earlier period, and CMP's pages fell by more than 27% -- the industry hardly seems an attractive investment.

Still, the combined Miller Freeman and CMP would rank first in tech ad pages and second in tech ad revenue in that report.

Miller Freeman, meanwhile, views the slide as a blip related to the Y2K problem, the Asian crisis and a dearth of new high-tech products, said Andrew Shanks, the company's London-based development director for Europe and Latin America.

"This is a small cyclical downturn in high-tech advertising, which will go back to a similar level," Mr. Shanks said.

Even if ad pages return to their previous level, job cuts will most likely hit CMP in the acquisition's aftermath. Observers say the cuts would have been much worse if a direct CMP competitor, such as Ziff-Davis or IDG, had bought the company.

Miller Freeman's management did not rule out job cuts. "Whenever you have an acquisition, the first thing you look at is overhead," said Miller Freeman Group President Regina Ridley.

Sam Whitmore, editor of mediasurvey.com, said he expects belt-tightening at CMP. Miller Freeman, he said, "is not in the business of providing the best possible editorial product, bar none. They provide the best possible editorial product within an economic formula that can produce profit and please advertisers."

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