After a year and a half of growing through acquisition, 101communications L.L.C. is venturing into launch mode. The Chatsworth, Calif.-based information technology media company plans to launch in August its first new monthly magazine, Enterprise Linux.
The publication, which first appeared last year as a quarterly supplement to ENT and other 101 publications, is aimed at IT professionals, the typical audience for 101's media properties. With a portfolio that includes Microsoft Certified Professional magazine, the Data Warehousing Institute conference and about 40 Web sites, 101 provides targeted publications for IT professionals and the advertisers who want to reach them.
"We're a niche publisher, niches of niches," said President-COO Jeffrey Klein. Founded in 1998, 101 is executing a classic "roll-up" strategy, amassing a group of media properties--including print, online and in-person--for the primary purpose of selling the aggregation at a profit.
101 started at zero properties in December 1998. Using the funding provided by Frontenac Co., a private equity firm based in Chicago, 101 made its first acquisition, Application Development Trends magazine, in February 1999. By February 2000, it had made eight acquisitions, including:
SIGS Publications, including C++ Report, Application Development Advisor and nine conferences.
Boucher Communications Inc.'s IT properties, including ENT and HP Professional.
IT Events of London, including Windows 2000 and Java Expo.
The acquisitions came slightly faster than 101 anticipated. "They became available and we got them at the right price," Klein said. "You can never plan the pace of acquisitions." 101 now has 16 publications, a dozen exhibitions and conferences and about 40 Web sites.
101 hasn't made any acquisitions since February. "We've spent the past five or six months digesting all of these acquisitions," Klein said. In classic roll-up style, 101 has centralized the back-office functions such as production, accounting, human resources and design in Chatsworth. Most recently, the company moved its conference and exhibition group to its headquarters. It also is leveraging economies of scale in buying paper, printing and other products and services.
Seeking additional funding
101 recently revealed that it is looking for a second round of funding to continue its acquisitions and that Frontenac would be supplying no additional money. Klein said this merely reflects how the deal was structured from the beginning.
Members of the media investment banking community said the news may mean 101's roll-up strategy is not going as well as planned. "It is unusual," said one media investment banker. Others, however, said nothing should be read into the search for a second round of funding. "It doesn't give me pause about their roll-up strategy," said Reed Phillips, managing partner of DeSilva & Phillips Inc., a media investment bank.
"We are profitable. We are a cash flow positive company," said Klein, who reiterated 101's plan to build a $150 million to $200 million company. The company anticipates revenues of $70 million this year.
In the first half of 2000, 101's U.S. advertising pages declined 22% to 1,891.60, from 2,425.35 in the year-earlier period, according to Adscope Inc., a tracking service. Over the same period, thanks in part to rate increases, advertising revenues for 101 climbed 24% to $17.4 million, from $14.0 million, according to Adscope estimates.
Klein said 101 hopes to build its revenues by attracting larger tech advertisers.
"We bought a lot of individual properties that were small," he said. "It was hard for their salespeople to get access to big accounts, so their percentage of revenue from big advertisers was lower than you'd expect. By creating scale, we hope to go after Intel, Microsoft and other companies with integrated solutions that go across all of our products."