Neustar is splitting its business into two independent, publicly traded companies.
The divide, announced Tuesday, is an effort to boost motivation in the capital markets by clearing up confusion around Neustar’s company story and the various services it provides, said Neustar president and CEO Lisa Hook.
One company will retain the Neustar name and provide order management and numbering services for wireline, wireless and cable communications providers. The second (name TBD) will house Neustar’s information services business, including marketing, security and data-related services.
Hook will lead the information services company, while Neustar SVP and CFO Paul Lalljie will take on the CEO position of the order management and numbering services entity.
“Some of our services appeal to value investors, some appeal to growth investors,” Hook told AdExchanger. “After a lot of thought, we decided to separate into two independent, publicly traded companies … each of which will have a very simple, pure-play story that will be easily understood by relevant investors and, we’re hoping, unlock shareholder value.”
Which is a good way to spin it. But the decision could also be due to Neustar’s loss of a major government contract last year to Swedish company Ericsson, which made up a little less than 50% of its total company revenue, said Gartner analyst Andrew Frank.
“They needed to deal with the fact that the loss of their number-porting contract was casting a shadow over their unrelated services, and this effectively addresses that problem,” he said. “It removes the mystery about how the loss of that revenue is going to affect their information services, specifically marketing.”
The separation will remove that strain from Neustar’s marketing services arm by allowing each business to operate under its own capital allocation policy.
Hook, however, said that the restructure isn’t about cost reductions but rather about creating room for Neustar’s information services arm to become a martech pure play.
Neustar started buying its way into information services in 2011 when it acquired caller ID infrastructure firm TARGUSinfo for $650 million, which produced $150 million in revenue at the time of acquisition. In 2013, Neustar acquired DMP Aggregate Knowledge for $119 million. (AK brought in $7 million in revenue.) And in late 2015, Neustar acquired marketing analytics company MarketShare for $450 million, which expects to see $70 million in revenue for 2016.
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Neustar intends to be a major player in the info services market, but whether or not it will be able to compete with the likes of Oracle, Adobe and Salesforce remains to be seen.
“We’re fairly unknown in the market, so we intend to use this event as our coming-out party, if you will, and no longer be under the radar,” Hook said.
“Doing a major rebrand will get them some attention and give them an opportunity to focus their message and recommit themselves to a vision that people may not be completely familiar with yet,” Gartner’s Frank agreed.
Neustar links security and marketing services to protect marketers form digital dangers like data leakage and DDoS attacks, while using its database of phone numbers and personal addresses to optimize their campaigns.
“From our point of view, security is marketing,” Hook said. “Protecting our clients’ websites and making them work as best as possible is part of the 360-degree brand experience online and offline.”
The yet-to-be-named information services company will not have (and never has had) access to the order management and numbering service’s data, which is heavily regulated by the Federal Communications Division.
Neustar’s order management and numbering services business saw $580 million in revenue in 2015, with a compounded annual growth rate (CAGR) of 8% over the past four years. Information services grew to $470 million in 2015, with a CAGR of 25% over the last four years.
The tax-free spin-off is expected to be completed within the year.
Updated AK projected revenue from $70M to $7M.
