Working at IDG Books for Dummies?

By Dave Marino-Nachison (TMF Braden)
December 29, 1999

"For Dummies" books publisher IDG Books (Nasdaq: IDGB) this morning announced its second high-level executive resignation in just over a month, as CFO James Doehrman said he would leave his post Jan. 14 to join Internet-based customer relationship management (CRM) company Octane Software.

President and publisher Steve Berkowitz left the company at the end of November, and he's since filed to put a large chunk of company shares on the market. For the time being, Chairman and CEO John Kilcullen has been overseeing operations in tandem with Executive Vice President John Ball. Director of SEC Reporting and Accounting Stuart Crumbaugh will handle IDG's financial and accounting operations, investor relations, and related tasks while the company finds someone to replace Doehrman.

Tracking executive comings and goings as a gauge of a company's prospects is a pretty inexact science, but when two top dogs leave the kennel in close succession, it's probably worth taking stock.

IDG shares, down about 6% at the lunch hour, are currently sitting near a 52-week low after having fallen more than 40% from early summer highs. Why? Best guess is that the company has been busy folding in major acquisitions that, while they've significantly boosted the company's standing as perhaps the leading provider of quick-reference information products, have also required increased managerial and marketing efforts as the portfolio has broadened.

Over the past year or so, to IDG's ever-growing offering of "For Dummies" books -- which now includes books on using Yahoo!'s (Nasdaq: YHOO) and eBay's (Nasdaq: EBAY) sites -- have been added the venerable Cliffs Notes franchise and, in August, the Frommer's Travel Guides, Weight Watchers Cookbooks, and J. K. Lasser tax books through the $83 million purchase of Macmillan General Reference Group.

Financial results for the fiscal year ended Sept. 30 tell part of the story. Full-year revenues rose 27% to nearly $180 million; gross, operating, and net margins all held fast or improved slightly, and all advanced at least as quickly as revenues. Unfortunately, there wasn't any balance sheet or cash flow information included in the company's press release, and the company yesterday said in an SEC filing that its annual report will be delayed while it finalizes its financial statements. Bummer!

And never mind, for now. The strategic question for IDG really seems to be whether consumers will accept the company's most recent moves and turn them into cash and earnings. Those recent moves include Internet initiatives to sell downloadable Cliffs Notes, a lifestyle series for the venerable yellow tomes that moves away from great texts and toward financial and technology-related matters, and an online help-desk effort in connection with Ask Jeeves (Nasdaq: ASKJ).

Whether the new strategies will leverage or dilute what the company has built over the past year might be the question investors want to consider with the shares currently trading at about 12 times projected fiscal 2000 earnings.

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