Dun & Bradstreet Corp. (DNB) and enterprise cloud computing company Salesforce.com (CRM) recently entered into a partnership, under which D&B will be the exclusive provider of company information on 200 million global businesses for Data.com.
Data.com provides complete and accurate business data on more than 200 million companies. Data.com will integrate D&B’s information with Jigsaw’s complete contact information to deliver unified company and contact data in the cloud. Data.com is available immediately with contact information from Jigsaw. D&B will start providing company information from the latter half of this calendar year.
Joint ventures and acquisitions have been the key growth catalysts for D&B over the last few years. The company has entered into joint ventures in the International segment, which has good growth potential. D&B is well positioned to benefit from its strength in international markets through majority-owned joint ventures in Japan, China, U.K., Ireland and India and anticipates higher cross border opportunities from Australia to other regions.
In 2010, D&B acquired privately-held Dun & Bradstreet Australia Holdings Limited, the leading credit and information services provider in Australia and New Zealand, for approximately $205.0 million in cash. Management expects the acquisition to be accretive in 2011.
These international partnerships and acquisitions drove revenue growth in the first half of 2011. International revenue (Asia Pacific, Europe and Other international markets) contributed 30.0% of the total revenue in the first half of 2011, compared with 25.0% in the prior-year period. In the second quarter of 2011, international revenue increased 33.0% year over year to $128.5 million.
D&B expects international revenue growth to continue in the second half of 2011, driven by the Australian acquisition, continued double-digit growth in China and improving sales execution in the United Kingdom.
We believe the partnership with Salesforce.com will boost D&B’s market share and customer penetration going forward, thereby driving further top-line growth.
D&B announced a two-year Strategic Technology Investment program in February 2010 aimed at strengthening its leading position in commercial data and improving its current technology platform. The program is expected to accelerate revenues and reduce expenses by improving data quality and enhancing time management, increasing the speed of product innovation and significantly reducing technology costs once the investment is complete.
D&B released a number of new products as a part of this program. The new products such as DNBi Pro for small customers in Risk Management Solution segment and D&B360 data as a service offering in Sales & Marketing have gained strong momentum in the recent times. D&B expects to bring additional CRM partners on line with its D&B360 product later in 2011, which will further drive revenue growth, in our view.
Recommendation
We believe D&B’s high margin business model, international growth potential, emerging market growth, strategic investments, incremental cost savings, new product pipeline and impressive cash flow will drive its long-term growth. However, integration related risks and foreign exchange headwinds remain concerns.
We maintain our Neutral rating on D&B over the long term (6-12 months). Currently, D&B has a Zacks #3 Rank, which implies Hold rating in the near term.
