Korn/Ferry to Buy Recruiter JobDirect.com

Korn/Ferry International said Wednesday that it will purchase JobDirect.com, a college recruitment company, as part of a strategy to provide the workplace equivalent of cradle-to-grave job placement services.

The acquisition--which the Los Angeles-based executive recruiter said will top $30 million, though it didn’t disclosed details--is its second major investment in an online job search service in a week.

Korn/Ferry, known primarily as a recruiter for high-salary senior management jobs, said last week that it has invested $8 million in Lexington, Mass.-based Webhire Inc., which operates Internet recruiting services Yahoo Resumes and Yahoo Recruiter.

Both investments are designed to help Korn/Ferry tap deeper into the job recruitment market, said Elizabeth Murray, the company’s chief financial officer.

Wall Street, which had shunned Korn/Ferry out of fear that its Internet investments might become a drag on its profit potential, appears to have reversed course. Korn/Ferry shares have risen 25% over the last five days, gaining 81 cents to close at $33 on the New York Stock Exchange on Wednesday.

Nonetheless, the shares remain well off their high of $44.13 reached in March, before an announcement that Korn/Ferry’s Internet operations would not turn a profit this year.

“Korn/Ferry has found itself in a Catch-22 with Wall Street,” said Mark Basham, an analyst with S&P; Equity Group in New York.

“If they had not pursued an online strategy, people would have sold off the stock, saying they needed to have one. But since they are spending money on an online strategy, some investors are penalizing them for it.”

Basham said much of the recent rise in the company’s stock has come from skeptical shareholders bailing in favor of those who agree with the company’s strategy. He believes that Korn/Ferry’s moves will pay off and that its share price will move into the $50 range by April.

Combined with its Futurestep.com subsidiary, an Internet service that recruits middle managers, the investments will help Korn/Ferry offer a full range of employees to employers, Basham said.

Korn/Ferry’s efforts to expand beyond its core senior management recruiting business represents a shift underway in the industry, Murray said.

“The executive recruiting business has traditionally been focused on the client companies looking for executives rather than the candidates themselves,” Murray said. “We need to work more with the candidates because the job market has become so competitive.”

Stamford, Conn.-based JobDirect.com will help Korn/Ferry find candidates as they leave college. Companies subscribe to the service, paying a monthly fee for access to the candidate database. The business will bring in about $20 million in revenue this year, Murray said.

Korn/Ferry hopes candidates who have found a job with the help of JobDirect.com will return later in their career and use Futurestep to find a middle-management job. Eventually, they might use Korn/Ferry’s executive recruiting service to tap into top management ranks.

Such a system would allow Korn/Ferry to collect several hundred thousand dollars in client-paid placement fees over an individual’s career.

“This is about obtaining relationships with the best and the brightest candidates so that they will keep coming back to us as they advance,” Murray said.

For its fiscal year ended April 30, Korn/Ferry earned $30.8 million, or 82 cents per share, compared with $17.4 million, or 62 cents a share, in the prior year. Revenue reached $500.7 million, compared with $356.1 million a year earlier.

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Korn/Ferry Rallies

Korn/Ferry International shares have risen 25% over the last five days as Wall Street has reacted positively to recent investments in its Internet-based job recruiting business. Weekly closes and latest on NYSE:

Wednesday:

$33, up

81 cents

Source: Bloomberg News