IDG founder finally decides to dip toe into public market

After 35 years in the business, International Data Group's (IDG) billionaire founder, Mr Pat McGovern, is finally ceding to years of industry speculation with his $2.3 billion (£1.65 billion) company's first public offering.

Last month, the Boston-based technology publishing and research empire registered with the US Federal Securities and Exchange commission publicly to offer company stock in its IDG Books division on the Nasdaq market.

The decision to float individual units of the privately-owned company rests on Mr McGovern's belief that investor behaviour is driven by asset allocation. The second generation Irishman whose family came from Cavan, now hopes Wall Street will place a high value on IDG's most lucrative operations, eventually increasing the value of the entire company.

If successful, he plans a 35 per cent offering over the next year of three other business units: IDG's research arm, International Data Corporation; Web Publishing Incorporated; and IDG World Expo. Mr McGovern owns 65 per cent of IDG, his employees own the remainder.

One of the first to market information services on technology, IDG today publishes 285 computer magazines and newspapers in 85 countries worldwide, including global flagships, Computerworld, Macworld and PC World. Mr McGovern was in Dublin last week to mark the fifth anniversary of IDG's partnership with Scope Communications, which publishes ComputerScope, PC Live and InfoLive.

Three years ago, IDG's European revenues were only growing at about 8 per cent annually; this year Europe has been its strongest growth region, with spending growing 18 per cent and revenues expected to rise 35 per cent.

"The threat of the Year 2000 has really impacted technology investment in Europe more so than the rest of the world leading to a greater technology focus. Asia was our big driver for many years, now Europe is the key growth area," he says.

Asia's fortunes continue to be an area of concern for IDG. Its most successful publication, China Computerworld has 150,000 paid subscribers and two million readers. Combined with 15 other computer publications, Mr McGovern has 18 million readers in China. The recent economic downturn has slowed IDG's average annual growth in the region from 30 per cent to 12 per cent.

Mr McGovern is upbeat about the outlook, however: "Asia's rapid economic growth was based on poor credit policies. Now Thailand, Malaysia, India and the Philippines are beginning to rebuild on firmer ground with strict banking laws. The Chinese government says it is not going to devalue and we are confident it won't. By 2000, I reckon Asia should be back to boom levels."

Mr McGovern's involvement in the IT industry began at 15 when he wired a computer assembled from hardware shop materials from the proceeds of his paper round money. It later won him the Philadelphia Science Fair and a scholarship to the Massachusetts Institute of Technology (MIT). When he graduated in biophysics, Mr McGovern had already started on the computer publications route, editing and publishing Computers and Automation, the first US computer magazine.

In 1964, the managing director of Univac, a large computer company, complained to Mr McGovern that the industry was unaware of how users were responding to products. Mr McGovern suggested that a survey to assess what was happening with installed computers would be welcomed by a lot of computer companies. He also said he would not do the job for less than $12,500.

"To my surprise he said `no'. When I lowered it to $10,000 he said no one in the industry would ever use such cheap information, I should make it $25,000. That's when I realised this was a good business to get into."

Within two weeks Mr McGovern had established International Data Corporation, and received $10,000 cheques from eight companies in advance of his findings. This was the beginning of a research company that generates $150 million annually. Some 80 per cent of the revenues are derived from corporate subscriptions for year-long access to research information covering industry trends, figures and forecasts.

By 1967, Mr McGovern started the weekly publication Computerworld, to keep US computer buyers up to speed on industry and product news. The 285 magazines that exist today are variations on the same theme, based on the "think globally but act locally" strategy espoused by Mr McGovern.

"We soon realised readers want local area information on prices, laws and vendors. When we issue global press releases every publication works to include local comment or reaction. We administer some control through readership questionnaires issued four times per year to monitor customers' needs. These combine with an annual quality control check to allow us monitor the publications closely, and act on the findings."

In the last four years, IDG has invested $60 million in establishing 240 Websites worldwide, largely to compete directly with its nearest competitor, Ziff-Davis Publishing, which has enjoyed considerable online success through its ZDNet site.

To date it has recouped about $30 million of that investment. For a publishing company like IDG, the Internet can deliver valuable customer information through registration. Already it issues 60 million customised newsletters daily in the US, and there are plans to maximise on Web commerce through shopping information channels for the IT industry.

"It's not going to happen overnight. Technology will always change more rapidly than you forecast, but human nature tends to change very slowly. People have to commit to using the technology before it's a success. Today's young students will be the change agents who build electronic commerce."

With 15 per cent of the global market, IDG's publications arm has come under pressure. Advertising revenue growth has slowed from between 20 and 30 per cent annually, to about 16 per cent. Ziff-Davis continues to be a strong competitor. Mr McGovern believes IDG's success lies in diversification where the business is not overly dependent on advertising revenue from publications today it accounts for about half the business.

The book business has been a huge success for IDG since it started in 1991 with the publication of DOS for Dummies on a budget of $2 million.

With profits of $100 million and a market capitalisation of $300 million, the book division's public offering on Nasdaq will raise capital for new projects at the various business units, and garner attractive returns for employees.

Mr McGovern is adamant he is not letting go of the reins, and remains determined that IDG will have a 20 per cent market share by 2020, to achieve a corporate size of $28 billion.

"I enjoy tremendously what I'm doing, and getting involved in new projects. Web-based commerce is about to explode, and the race to provide greater bandwidth will see some very interesting people enter the market. A lot of my senior executives are still in their 40s, so we're ready with a new team for a new generation."