Friday, July 16, 2004

Sizing Up Seisint: LexisNexis Opts for Content Analysis

In a major move, Reed-Elsevier has acquired Florida-based Seisint for $775 million in cash, nearly seven times Seisint's estimated 2004 revenues. What does Seisint have that Reed-Elsevier wants so badly?

In short, the answer is software that can sift through massive amounts of data at high speeds -- processing billions of records at sub-second speeds, according to company literature -- and most importantly of all, the ability to relate data from disparate datasets.

In addition to software, Seisint has also built its own database, comprised primarily of public record databases and commercially available databases such as telephone white pages directories. Seisint clients can use its technology to mine their internal databases, Seisint's database, or a blend of the two.

Though Seisint was originally founded to help large corporations to better leverage their own internal data, Seisint found a ready market for its offerings in the law enforcement market, and is also a big player in the burgeoning homeland security market. Indeed, Seisint provided the impetus for a controversial program called Matrix, where individual states are combining police and other records with commercial and public record databases, all powered by Seisint technology.

Rather than making the mistake of offering itself as a raw capability in search of problems to solve, Seisint has been clever in packaging market-specific applications of its technology and data. Just two examples: SECURINT (a employee background screening service) and SMARTINJURY (background information on potential jurors for use by attorneys), show why Reed-Elsevier was so attracted to Seisint, and why it is such a glove-fit with Reed's Lexis-Nexis unit. Not only is Lexis-Nexis active in this area already through its Risk Management group, but Lexis-Nexis has the potential to vastly expand the amount of data available to Seisint software to analyze, making Seisint products more powerful, while opening up a wide array of new business opportunities for Lexis-Nexis. It's been suggested that Seisint will nearly double Lexis-Nexis Risk Management group revenues.

Overall, we see this acquisition as a brilliant one for Reed-Elsevier. Don't mind the multiple: Reed has paid seemingly sky-high prices for acquisitions in the past and more than once had the last laugh. The only potential cloud on the horizon is the issue of privacy, as Reed through Lexis-Nexis becomes a prime player in the personal information content space. Of course, this could become an issue for Lexis-Nexis even without Seisint, since Lexis-Nexis was independently moving into this area with a host of new background screening and PATRIOT Act-related product offerings.

Most importantly, this acquisition is a huge acknowledgement by Reed-Elsevier that future success lies not simply in amassing ever-larger pools of data, but making that data more accessible, understandable and usable. This is one of the largest dollar commitments to infocommerce that we've seen to date.
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