Ziff-Davis breakup nears completion

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With the planned spinoff of ZD events, which was announced earlier this month, Ziff-Davis Inc., New York, has completely dismantled the largest integrated tech media company, creating a brood of Baby Z's.

The irony is now that Tokyo-based Softbank Corp. has taken a wrecking ball to the massive multimedia operation, most of the Baby Z's -- Ziff-Davis Publishing, ZDNet, ZDTV and ZD Events -- appear poised to begin courting marketers by assembling multimedia companies of their own.

ZD Events, for instance, plans to bolster the Web presence of its key properties, Comdex, NetWorld+Interop and Seybold Seminars. While ZD Events goes to work on that, Ziff-Davis, after failing to fetch a suitable price for its events division, will spin off the business as a separate public company owned by the shareholders of Ziff-Davis common stock.

"They have a lot of pride and a lot of belief in what Comdex in particular and the events group in general can do," said Sam Whitmore, editor of, commenting on Ziff-Davis' refusal to give in to a lowball bid for ZD Events. "They were simply not going to take a financial blow like that."

Tokyo-based Softbank Corp. will be the majority shareholder in ZD Events, with about 70% of the stock. Masayoshi Son, Softbank's president-CEO, said when Ziff-Davis' deconstruction began in July that Softbank wanted to "limit its majority position in companies that do not operate totally on the Internet platform."

Ziff-Davis' breakup has produced mixed results for Softbank. Clearly the company did not want to retain ZD Events, which is not an Internet company despite marketing its flagship trade show as ".comdex." But it is unclear whether technology marketers have gained or lost in the sell-off of Ziff-Davis' properties.

By dissolving Ziff-Davis, Softbank will have accomplished a key goal: establishing technology portal ZDNet as an independent, publicly owned company that will no longer trade as a tracking stock. What remains of Ziff-Davis Inc., including Computer Shopper and a stake in Red Herring, will be folded into ZDNet.

"We expect that resolution of the events taking place at the parent company level should lift a cloud over ZDNet shares," Lazard Freres & Co. analyst Mandana Hormozi wrote in a March 7 report. She has a target of $42 a share for ZDNet; the tracking stock stood at $27.81 a share March 22, giving the company a market capitalization of $2.05 billion.

Softbank has also significantly paid down its $1.2 billion debt with the proceeds of its sales of ZD Market Intelligence, ZD Education and ZDTV. The sale of Ziff-Davis Publishing is expected to close by the end of this month. ZD Events will, however, create a $400 million debt for its shareholders.

The events business, which will search for a new name because the Ziff-Davis name is now controlled by Ziff-Davis Publishing and "ZD" by ZDNet, will be worth about $650 million when recapitalized in about 120 days, according to Hormozi. Softbank paid $800 million for Comdex alone in 1996.

Frederic Rosen will head the events business, an appointment Hormozi called "an inspiredchoice." His charge will be to jump-start the business, which has stalled recently with its revenue falling from $269.9 million in 1998 to $243.1 million in 1999. As chairman-CEO of Ticketmaster Group Inc., Rosen turned the company into a nationwide force through aggressive acquisition and moving early to the Internet. He plans a similar approach with the former ZD Events.

The company plans to make acquisitions beyond the IT market and create online trade shows for its properties. "It's time to make this a 365-day-a-year business, having continuous virtual trade show on our Web site," said Jason Chudnofsky, president-COO of the new events business.

The strategy of the former ZD Events illustrates the irony in the Ziff-Davis sell-off. Ziff-Davis had built what is considered the Holy Grail in business media: a fully integrated company with print, Web and face-to-face properties serving a specific market cluster -- in this case, the IT industry. Now that Softbank has taken a wrecking ball to this massive company, the independent pieces that remain plan to begin building multimedia companies of their own.

Ziff-Davis Publishing's PC Magazine is making a move into hosting conferences. ZDTV and the former ZD Events plan to bolster their Web sites.

Industry observers speculate that this focus on subbrands, rather than on the Ziff-Davis umbrella brand, may aid smaller marketers that are trying to reach IT market niches.

"On an individual property basis, this is going to expand the ability of advertisers to communicate with their audience through special events and other brand extensions," said Don Byrnes, president of Carat Freeman, a Newton, Mass.-based technology media agency.

At the same time, larger marketers may be hurt by the breakup of Ziff-Davis into Baby Z's.

"It's more difficult for the large companies," Byrnes said. "The IBMs of the world who are used to doing business with the Ziff-Davis entity probably won't be getting the same discounts."

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