Analysts Skeptical As Acxiom Works to Retain Global Presence

by Luke Jones  on Monday, Dec. 10, 2012 12:00 am  

Acxiom Corp.’s Chinese business, called ChinaLoop, has grown in size since its acquisition in 2004. Overall, however, Acxiom has struggled to make its international efforts profitable. (Photo by Jeff Hankins)

Acxiom Corp. has been global for years, but it’s fighting a battle to stay that way through historical losses, setbacks and management changes. Its current management team is pushing for expansion and improvement overseas, but analysts remain skeptical.

Acxiom, which has its headquarters in Little Rock, delivers some data or services in 85 countries. Chief Revenue Officer Nada Stirratt told Arkansas Business in an email that Acxiom is expecting to grow that number through 2013. Stirratt said that 68 percent of the world’s advertising spending and 89 percent of the world’s Internet users are outside the U.S., and that the company had about 1,000 international employees across 63 offices serving about 7,000 clients. The company’s largest overseas interests are Claritas and Consodata in Europe, followed by GoDigital in Brazil and ChinaLoop in China, Hong Kong and Taiwan.

Stirratt said Unilever in China is a major client for a pending data management platform. In early 2011, the company said ChinaLoop had grown to 180 employees and had gained operations in Hong Kong and Taiwan.

The company also recently partnered with Mindshare, a media and marketing service network serving Europe and Australia. Acxiom Brazil received a 2012 Top of Business International Award.

But on the other side of the coin, the company has been dropping some of its international locations amid losses. In 2011, Acxiom divested its operations in Portugal and the Netherlands. By March, the end of Acxiom’s fiscal 2012, the company had disposed of its interest in Acxiom Mena (Middle East and North Africa), recording a revenue loss of $2.5 million on the latter divestiture.

International revenue for Acxiom’s companies increased by $3.7 million, or about 3 percent, between fiscal 2011 and 2012. Improved revenue in Australia and China offset a decline of $1.2 million in Brazil. The previous year, Acxiom’s international revenue decreased $4.8 million, or about 4 percent. Acxiom blamed the fall mainly on European operations, where revenue was down by almost $20 million. Again, the fall was offset by Australia and China.

According to its annual report for fiscal 2012, Acxiom had taken impairments of $17.8 million from its Brazil brand and $79.7 million from its Europe and Mena brands. The company had total revenue of $1.1 billion for fiscal 2012.

Acxiom’s Plans

CEO Scott Howe, who joined Acxiom in mid-2011, has been talking about repairing the company’s international organizations since he was hired.

During a conference call in May, Piper Jaffray analyst John Crowther called Brazil a “holdup” and asked Howe what the company was doing to become profitable in that sector.

“It’s not just Brazil but across all of our international businesses,” Howe answered. “We’re just hitting on all cylinders and the comparison relative to U.S. businesses from a margin and growth perspective just hasn’t been as historically strong. So in our restructuring efforts, we did dramatically streamline headcount in Brazil and Europe in particular over a reduction of well over a hundred [employees].”

In the company’s latest report, Acxiom stated that its international initiative was picking up.

“Our goal of profitably running our international business is taking shape,” Howe said in October during an earnings conference call.

In response to a question by an analyst, CFO Warren Jenson said he wanted Acxiom’s international divisions to be profitable “by year end.” He said that the company was increasing coordination between its international clients and employees. Chief Product & Engineering Officer Phil Mui, who was hired in April, had also visited several of Acxiom’s international headquarters to “figure out how to better globalize our products,” Jenson said.

Howe added that the job of fixing the international companies meant “weaning ourselves off of unprofitable products and clients.”

The type of coordination going on at Acxiom, Howe said, “simply didn’t happen … a year or two ago.”

But Carter Malloy, an analyst for Stephens Inc. of Little Rock, said despite the company’s good intentions, Acxiom’s European operations have not improved since they were acquired in 2004.

They were already falling short by 2005. At its annual meeting in 2005, executives said the companies hadn’t met Acxiom’s “aggressive initial expectations.” Lee Hodges, then chief operations leader, expressed regret that Acxiom hadn’t anticipated how complex the European buyouts would be. Stemming from those difficulties, Acxiom chopped 250, or 4 percent, of its employees worldwide in mid-2005.

“It’s been years and years of spotty track records and sliding revenues with little to no profitability,” Malloy said. “It’s been a very, very long time since there was a quarter of Acxiom where their European business did well and had any type of good standout. The only type of standout was a bad standout.”

Malloy said Europe’s bad performance was from equal parts management, reseller relationships and sales execution, not to mention a tough European economy. Malloy said Acxiom’s international future is a mystery: Even though it’s been discussed over conference calls, the company hasn’t put forth much in the way of specifics beyond some management changes — like hiring Christian Peck as managing director of U.K. operations in June.

“They’ve had some management changes internationally, some tweaks in strategy for sure, but in terms of details, there hasn’t been anything loud or important thus far,” Malloy said.

 

 

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