Credit information solutions major Equifax Inc. (EFX: 27.78 0.00 0.00%) recently completed the sale of its Direct Marketing Services (DMS) division to Dallas-based loyalty and marketing solutions vendor, Alliance Data Systems Corp. Equifax’s direct marketing division provided data-driven marketing services to facilitate targeted marketing campaigns through database marketing and hosting. The decision makes sense for Equifax, since DMS has for some time, ceased to be a core part of its operations. The divestiture would free up funds that could be used to expand core competencies instead.
The deal was announced on June 2, 2010, and as per its terms, Equifax sold all the assets of its marketing division for a total cash value of $117.0 million.
Equifax expects the transaction to result in a one-time after-tax gain of 8 cents per share, but dilute second half 2010 earnings per share by 4 cents. Equifax intends to use the proceeds for business expansion and other corporate purposes.
Apart from the divestiture, we are encouraged by Equifax’s initiatives to drive continued customer wins. Equifax recently launched a website specifically targeted at small business owners. The Small Business website will make credit reports of more than 25 million companies readily available to its customers. These reports are designed to gauge the credit-worthiness of the parties that the
small businesses could be dealing with, thus reducing possible losses.
Equifax is also trying to win popularity through the launch of the “Equifax Personal Finance Blog”, which aims to inform and educate consumers on personal finance and also provide practical financial tips from the financial experts.
Equifax is well positioned to benefit from its strength in important and international markets. Equifax is streamlining its operations, focusing on its core competency and concentrating on functions such as credit scoring, credit modeling services, decision making tools, fraud detection and consultancy
services.
Equifax delivered decent first quarter results and provided encouraging guidance for the second quarter. Equifax’s alliance with International Business Machines Inc. (IBM: 123.46 0.00 0.00%) is expected to improve the company’s customer service and expand the customer base.
The introduction of new products and solutions along with the addition of key technical personnel appears to be a good growth strategy for Equifax, but competitive pricing remains a key parameter for the success of these products and services.
Equifax delivered decent first quarter results and provided encouraging guidance for the second quarter. Equifax’s alliance with International Business Machines Inc. (IBM: 123.46 0.00 0.00%) is expected to improve the company’s customer service and expand the customer base.
The introduction of new products and solutions along with the addition of key technical personnel appears to be a good growth strategy for Equifax, but competitive pricing remains a key parameter for the success of these products and services.
However, given the strong correlation between consumer and financial markets, as well as significant U.S. exposure, Equifax’s results are expected to improve with a recovery in the U.S. economy. Though there could be near-term pressure on the shares, we believe there are long term potentials for the shares. Hence we have a long-term Neutral recommendation on Equifax shares.
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