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Poll firm agrees to a buyer

Rochester Business Journal
November 29, 2013

Harris Interactive Inc. has made little money since 2008. Market research goliath Nielsen Holdings N.V. could change that.
 
In a $116.6 million deal, Nielsen agreed this week to buy the Brighton-based company, making its first purchase of an online market research company.
 
"Nielsen is a very good company, so Nielsen doesn't ruin its assets," said Gordon Black, former CEO of Harris Interactive. "I think that Nielsen will strengthen the Harris assets, which have been eroded badly for the last seven or eight years."
 
Founded by Black in 1975, Harris Interactive employs some 125 people in the Rochester area and nearly 550 people worldwide.
 
The company lost money every year from 2008 to 2012-a total of more than $175 million-until turning a profit of $6.9 million for the fiscal year ended June 30. Annual revenues declined from $236 million in 2008 to $140 million in 2013.
 
The company set the price for its December 1999 initial public offering at $14 a share and reached $20 a share in early trading. At the end of its fiscal year on June 30, 2008, the stock closed at $2.01. Since then, its range has been 18 cents, in March 2009, to $2.08 last Friday.
 
Although the merger creates uncertainty for the local job market, some industry experts feel the move will be a positive one for employees.
 
"If I were the people working at Harris Interactive, I'd feel very good about it," said Robert Lederer, editor and publisher for RFL Communications Inc., a publisher of four newsletters on the market research industry. "There's always got to be a concern about a turnover when a company gets purchased, but because Nielsen is not buying a company that is in a field that they were already doing business in, I think there is some job security. ... That may not be true for the higher-ups."
 
The acquisition is expected to close in the first quarter of 2014. The merger was approved unanimously by Harris Interactive's board.
 
President and CEO Al Angrisani said the deal marks the successful completion of the turnaround strategy begun in July 2011. The board opted for the Nielsen transaction after a review of the company's strategic alternatives, which began this year.
 
John Lewis, president of the Americas for Nielsen, said he believes his company's clients and capabilities will foster success for Harris Interactive.
 
Nielsen, which is based in New York City and the Netherlands, agreed to pay $2 a share. The companies said the price represented a 2 percent premium over the volume-weighted average closing price of the company's common stock during the past 60 trading days.
 
Nielsen operates in more than 100 countries and earned $1.3 billion in the third quarter. It has expanded into new areas of research over the last decade, including movie tracking, music tracking, book sales and radio ratings. The move to online panels of respondents is representative of Nielsen's adaptation in the research industry and also a message to competitors.
 
"(It) puts their competitors on notice that Nielsen is not going to roll over and play dead," said George Conboy, chairman of Brighton Securities Corp. "They're going to compete; you don't want $6 billion in sales to go away to your competitors. Kodak tried that, and it didn't work that well. Either embrace technology or get consumed by it. Nielsen has chosen to embrace it."
 
The acquisition will mean new opportunity for Harris Interactive, which some believe could not be turned around without a merger.
 
"It looks like we're on track with Nielsen this year to have just under $6 billion in annual sales, so you've got a much bigger, much stronger company with a lot of resources that can take Harris' knowledge and authority and leverage that," Conboy said. "It looks at this point like a win-win for the Harris employees and for the Nielsen organization."
 
Black, however, is not so sure.
 
"It will do a number of things: One, it will get rid of the board, and I think that's very important," Black said. "With those board members, I don't think there's a snowball's chance in hell that the company would ever regrow, because they lacked any vision and they opposed any idea that we ever brought to the table-every single one."
 
He added: "They changed the direction completely in 2005, and the direction they went in didn't work. It's saving the company from oblivion, but it is not guaranteeing that the company will be successful in the future. I think that they have more chance for success with Nielsen than they did on their own. With that board, there's no chance in the world that they'd be successful on their own."
 
Lederer could see problems down the road for Harris Interactive without the merger.
 
"I don't know what would have happened to Harris longer-term," he said. "They were continuing to hit new bumps in the road. They'd have some improvement in revenue and their profits would be down, then their profits would be OK and their revenue was down. Obviously, you need to do both. It's not going to succeed on its own; it's just not."
 
One of the trends of market research is for companies to purchase their own technology to conduct surveys, independent of research firms. SurveyMonkey.com LLC is one example of the do-it-yourself approach to research that some companies are using. This fast and cost-efficient method of research makes more sense for some companies, industry officials say.
 
Nielsen's decision to venture into online research, leveraging skills of Harris Interactive, is a move aligned with the industry's direction.
 
"It suggests that Nielsen has progressive management that understands ... the disruption now. Remember, the advertising and survey industries have seen considerable disruption over the last few years from the Internet, disruption from technology, and Nielsen has two choices: embrace technology or be disrupted by it," Conboy said. "Nielsen has chosen to embrace technology, and I think that's a wise choice on their part."
 
Ultimately, the merger will spur change for both companies as Nielsen sets its new research goals.
 
"It made me sad because it represents the end of a dream that a lot of us had, but the dream was over a long time ago, so it doesn't make any difference at this point," Black said. "I thought that the company could grow and continue to grow into even larger market research. The last three years I was in charge, we were the fastest-growing market research company in the world."
 
He added: "And I thought we could keep growing and keep acquiring new technologies and reform and revolutionize the way we did market research in the United States, because calling people at dinner is not a fun thing to do."

11/29/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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