Donnelley Buys Sequence Personal - Analyst Blog
18 August 2011 - 10:15PM
Zacks
Printing major R.R.
Donnelley & Sons Company (RRD)
recently announced that it has acquired New York-based privately
held software company Sequence Personal, for an undisclosed
amount.
Sequence’s custom publishing
software helps publishers to select content, which can be digitally
produced as a specialized publication. The proprietary software
also enables publishers to develop targeted content for readers and
advertisers.
Donnelley will integrate Sequence
Personal into its CustomPoint Solutions Group. The Group provides a
host of services to customers including innovative content
creation, management and delivery.
Donnelley believes that the
addition of Sequence’s technology to its group of solutions will
boost the revenue earning capacity of its customers. We believe
that the acquisition will also enable Donnelley to expand into new
verticals and help it gain significant market share going
forward.
Donnelley’s growth has been
primarily driven by significant acquisitions over the last few
years. From March 2008 to date, the company has acquired 6
companies, 3 of which were in 2010 and 2 in 2009. In the first half
of 2011, Donnelley acquired 2 companies including Helium, Inc. and
Journalism Online, LLC.
Although the company acquired 3
companies in 2010, the most significant was Bowne & Co, a
provider of digital one-to-one printing services for health care,
transactional communications, financial services, marketing
communications and other applications. The Bowne acquisition proved
accretive to Donnelley in the very first year. Bowne contributed
0.6% ($61.2 million) of the total revenue growth of $161.5 million
in fiscal 2010.
In December 2010, Donnelley
acquired San Francisco-based Nimblefish Technologies, a provider of
multi-channel marketing services to leading retail, technology,
telecom and hospitality companies. Donnelley also acquired the
assets of 8touches, an online provider of easy-to-use tools that
allow real estate associates, brokers, Multiple Listing Service
(MLS) associations and other marketers to create customized
communications materials.
We believe Donnelley is emphasizing
on acquisitions to expand and enhance its offering to its current
customers, as well as to create more opportunities for its products
to reach new clients. The company’s continued focus on acquisitions
will also spur its already dominant market position and drive
long-term growth, in our view.
Recommendation
We remain Neutral on a long term
basis (3-6 months). Donnelley is witnessing stabilization in
demand, increase in volumes and new customer wins. We believe that
strong alliances and customer wins including those of
AT&T Inc. (T) and
Verizon Communications Inc. (VZ)
will create value for the company over the long term.
However, we prefer to remain on the
sidelines due to weak macro economic conditions prevailing in most
of Donnelley’s current and prospective markets. Moreover, higher
pension expenses, continuing pricing pressure, volatility in raw
material prices and a highly leveraged balance sheet are
significant headwinds going forward.
Currently, R.R. Donnelley has a
Zacks #4 Rank, which implies a Sell rating on a short-term basis
(1-3 months).
DONNELLEY (RR) (RRD): Free Stock Analysis Report
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VERIZON COMM (VZ): Free Stock Analysis Report
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