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From the Survey: The Dun & Bradstreet Corporation
The Dun & Bradstreet Corporation (DNB) is a global provider of business information and related decision-support services. It operates offices in 28 countries and conducts operations in another ten via minority interests in joint-venture companies. DNB currently utilizes independent consultants across more than 150 nations to compile credit information on over 100 million different businesses worldwide.
The company is divided into three main operating segments, namely risk management solutions, sales & marketing, as well as Internet services. The risk management division, currently more than 60% of overall revenues, can be further divided into two categories, chiefly traditional and value-added solutions. The former is comprised of detailed customer reports generated from DNB’s database, which are primarily used for analyzing and judging new credit applications. The latter’s main function is to support automated decision making and portfolio management systems through a complex scoring rubric.
Sales and marketing products represent the second largest portion of the overall revenue pie, roughly 30%, with diversified support applications. Dun & Bradstreet offers marketing lists, labels, and customized data files customers request to bolster direct mail and various other marketing activities.
Lastly, Internet services items comprise less than 10% of total sales, but still reflect a vital revenue channel, which continues to display strong growth. The segment offers business entities an organized, more-efficient framework to address advertising and selling needs on a daily basis. Furthermore, it provides clients with large quantities of information through a user-friendly portal. These key pieces of data include: basic company facts, industry and executive analysis, integration tools, workflow solutions, as well as advice, research, and tips regarding the start-up and management of a new business.
The company is set-up to serve large, medium, and small-sized customers. Principal clients are banks and other credit and financial institutions, manufacturers, wholesalers, retailers, government agencies, insurance companies and telecommunications companies, as well as sales, marketing and business development professionals. None of its customers accounted for more than 10% of 2011 total revenue, or of the revenue of the North American, Asia Pacific, European, and other International Markets segments, which helps the company more-effectively maintain stability through turbulent market cycles.
Dun & Bradstreet is subject to highly competitive conditions in all aspects of its business. In North America, the company is a market leader, with respect to its Risk Management Solutions business, in terms of revenue. DNB competes with customers’ own internal business practices by continually developing more efficient alternatives to their risk management processes. It also directly competes with a broad range of companies, including consumer credit companies, such as Equifax, Inc. (EFX) and Experian Information Solutions, Inc. (“Experian”), which have traditionally offered primarily consumer information services, but also offer products that combine consumer information with business information as a tool to help customers make credit decisions with respect to small businesses.
Direct competitors in Sales & Marketing Solutions include companies, such as Equifax and infoGROUP. In addition, it faces heavy competition in data services from customers’ own internal development and data quality software solutions.
However, in the Internet Solutions division, DNB’s Hoover’s product line goes up against varied businesses, based on the size of the customer and the level of spending available for services such as Hoover’s Online. On the high end of product pricing, Hoover’s Researcher, Hoover’s Prospector and Hoover’s Relationship Manager products contend with other business information providers such as infoGROUP. New, less established entrants are also pursuing some of these same customers. On the lower end of product pricing, Hoover’s Essential Ecommerce-enabled products, as well as the Hoovers Acquisition free site mainly battle with advertising-supported Internet sites, and other free or low-priced information sources, such as Yahoo! (YHOO) Finance and MarketWatch, Inc.
Outside the United States, the competitive environment shifts by region and country, and can be significantly affected by the legislative actions of local governments.
In Europe, direct opposition is primarily local, such as Experian in the UK and Graydon in Belgium and the Netherlands. In addition, the Sales & Marketing Solutions landscape is both localized and fragmented throughout Europe, where numerous local players of varying size compete for business.
Throughout Asia, the company faces competition in its Risk Management Solutions business from a mix of local and global providers. For example, DNB goes head-to-head with Sinotrust in China, which is majority owned by Experian, Veda in Australia, and Experian in India. Moreover, as in Europe, the Sales & Marketing Solutions landscape throughout Asia is limited to a small area and patchy.
Shares of Dun & Bradstreet Corp. have fallen recently, owing largely, we think, to scrutiny surrounding the company’s data collection unit in China. Currently, it has halted operations within this region, since a probe regarding a potential violation of privacy laws is still ongoing. Nevertheless, this stock remains an intriguing option for many investors. It offers a unique opportunity to profit from the growing demand for information and information services with a broad product scope and worldwide footprint.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.