The company is proposing to unbundle itself and in the process split remaining corporate ties between the Nielsen Marketing and Nielsen Media research operations. The result, say industry analysts, could be price hikes ahead for marketers using Nielsen Marketing Research and perhaps even for those using rival Information Resources Inc.
Neither service has been very profitable in recent years, as both have kept prices down in a struggle for U.S. share while spending heavily to expand overseas.
NEED TO CHANGE
Citing disclosures to analysts that Nielsen Marketing Research's rate of return is just 1% on $1.3 billion in revenue, Michael Ellmann of Wertheim Schroder & Co. said that if Dun & Bradstreet follows its plan the unit faces a need to sharply raise its rate of return.
"A company cannot earn as little as that for a very long time and be viable," he said. "The question is, are there factors depressing results ....There is a presumption that the marketing departments of a number of big companies could barely open their doors without this information and [that] the information is vastly more valuable than is shown by the current profits of these two companies."
James Goss, an analyst with Duff & Phelps, Chicago, warned that Nielsen going on its own would face challenges.
"The risk is that it won't be where it was before when it owned the market and, second, that it won't have the deep pockets of Dun & Bradstreet, so a perceived competitive advantage will be gone," he said.
THE REASONS WHY
Nielsen says the low rate of return reflected investment spending targeted overseas and to improve some U.S. products that position the company for the future. That spending won't need to be repeated, Nielsen said.
Dun & Bradstreet CEO Robert E. Weissman would leave to head up Cognizant Corp., the proposed unit to include Nielsen Media Research, most of the Gartner Group and IMS International, a supplier of marketing information to the pharmaceutical and healthcare industry. A.C. Nielsen would be spun off as Nielsen Marketing Research.