Knight-Ridder Inc. announced Monday that it has agreed to buy Dialog Information Services from Lockheed Corp. for $353 million, a move that will give the Miami, Fla.-based media company a much expanded stake in the growing market for electronic information.
Palo Alto-based Dialog has been a pioneer in what is known as the electronic data retrieval business, selling information from its more than 320 databases to 91,000 subscribers in 86 countries. Last year it posted a profit of $9.2 million on sales of $98.1 million.
Dialog began in 1963 as a research and development program of Lockheed's Space and Missile division. Created to help the work of Lockheed engineers, Dialog began selling its databases to outside subscribers in 1972, said Lockheed spokesman Robert A. Slayman.
Subscribers to Dialog who need to know more about, for example, a new type of semiconductor chip, would use a personal computer, modem and telephone to search a group of publications for all mentions of the chip. A modem is a device that allows computers to communicate over telephone lines.
Knight-Ridder said it would complete the acquisition by the end of September. The conglomerate's most likely move then will be to broaden the range of databases offered by Dialog, adding more consumer-oriented information to complement the company's traditional strength in technical fields, said Timothy P. Bajarin, executive vice president of Creative Strategies, a consulting firm in Santa Clara.
The deal makes sense for both Knight-Ridder and Calabasas-based Lockheed, said Bajarin. Dialog's huge databases make the company worth the high price--3 1/2 times sales and 38 times profit--that Knight-Ridder is paying, he said. "I don't think (the price) is outrageous. . . . It's a very interesting move and a very good one."
Selling Dialog also is a smart decision for Lockheed because data retrieval has little to do with the giant defense manufacturer's main business, Bajarin added. "It was a strange business move from day one. Online business information just isn't their bag."
Lockheed had received a series of inquiries from companies interested in buying Dialog before finally selling to Knight-Ridder, Slayman said. "We believe it will enhance our shareholder value. . . . We just saw an opportunity here."
Lockheed retains five other information subsidiaries, he added, including Burbank-based CADAM, which develops computer-aided design and manufacturing techniques.
In a prepared statement, Knight-Ridder President James Batten said the acquisition "doubles the size of our rapidly expanding business information services division and positions us to participate in a major way in one of the world's fastest-growing industries."