ZD'S ERIC HIPPEAU: 'I LIVE, BREATHE, SLEEP COMPUTERS'How the CEO is turbocharging Ziff-Davis
Though you've probably never heard of him, Eric Hippeau is among the most influential people in the computer industry. Just ask Bill Gates, who brainstorms with him about potential products. Or Michael Dell, who relies on him to spread the word on new wares. Or any of the elite who join Hippeau at his annual Aspen retreat.
Hippeau wields his power not through money but through words. He is chief executive of Ziff-Davis Inc., which serves as one of the $210 billion computer industry's main links to consumers. Starting with seven magazines when he took the helm in 1991, Hippeau has built up nearly 100 computer titles and more than $1 billion in sales in a rapid-fire expansion encouraged by Ziff-Davis's new owner, Japan's Softbank Corp. Anchored by the venerable PC Magazine, the empire now includes a popular Web site, a research arm, and an online university. He's also about to launch a 24-hour cable-TV channel devoted to computers and the Net.
Hippeau's army of editors get the latest PCs and software so they can tell 23 million consumers what's worth buying--and, occasionally, what's not. ''If they slam a product, it devastates sales,'' says Theodore W. Waitt, CEO at Gateway 2000 Inc. And Hippeau just got more power. Now under his wing is a sister division--Comdex, the leading computer trade show, where industry brass kick off new offerings. ''He is the Bill Gates of computer media,'' says Gordon E. Eubanks, CEO of software maker Symantec Corp.
Maybe, but Softbank is no Microsoft. The Japanese software distributor was a darling when it hit Tokyo's over-the-counter market in 1994, launching a buying spree capped by last year's $2.1 billion purchase of Ziff-Davis from leveraged-buyout specialists Forstmann Little & Co. Its revenues have doubled, to $5 billion--but the growth came at a price. Worried about the $2.2 billion in debt Softbank had piled up, investors began bailing out last spring. Their concerns turned into panic over the summer when an ex-employee published a book alleging questionable accounting practices. The book also exposed Softbank founder Masayoshi Son's practice of shifting massive debt from Softbank to his own private assetmanagement firm, MAC Inc. Softbank stock plunged and is now down nearly 70% from its peak in April, 1996.
Son says his financial practices would be standard in the U.S. and that he can cover his debts with Softbank's hefty cash flow. ''Investors in Japan just don't yet understand the beauty of M&A,'' he says. The experience, say sources close to Softbank, has made Son consider more seriously spinning off Ziff-Davis to U.S. shareholders. Son won't comment except to say: ''America is a paradise for business. Japan is closed.''
Analysts in Japan widely agree that local investors, who have failed to take into account the strength of Ziff-Davis, overreacted. ''Part of the problem is that the heartbeat of the corporation is on the other side of the world,'' says Mahendra Negi of Merrill Lynch in Japan. Indeed, the publisher has emerged as Softbank's profit engine. With Comdex, Ziff-Davis accounts for only a third of the corporation's overall revenues, but earnings of about $300 million provide more than half Softbank's profits.
''COLD FISH.'' So far, investor worries haven't slowed down Ziff-Davis. Son insists the company will retain all its own earnings. And Hippeau maintains that Softbank's problems ''have absolutely no impact on our business.''
Hippeau has made a career of proving the skeptics wrong. In 1971, at age 20, he dropped out of the Sorbonne and took a newspaper job in Brazil, where his father managed United Press International. ''I was a Frenchman in a Portuguese-speaking country, writing for an English-language newspaper about baseball,'' he says. Hippeau soon became editor, cancelling Dear Abby and launching a high-tech section. He lured in ads from U.S. computer vendors so successfully that he soon quit and started a local magazine called Data News.
But Hippeau faced stiff hurdles. In December, 1975, Brazil banned computer imports. Advertising stopped and his sole backer pulled out. ''I said, 'Just give me 24 hours unlimited use of the phone,''' he recalls. Hippeau tracked down Patrick J. McGovern, CEO of International Data Group (IDG), publisher of Computer World. McGovern was looking out his window at a Boston blizzard when the phone rang. ''I said, 'What's the weather like there?''' McGovern recalls. By New Year's Eve, the two were sipping drinks on Copacabana Beach and jotting a business plan on a cocktail napkin. The ban, they figured, would soon lift. But in the meantime, it was such a struggle that Hippeau and his head salesman shared not only an apartment but a cheap suit. Hippeau got so desperate he won one advertiser over by showing him the holes in his shoes. ''I put my foot on his desk and said, 'I need this,''' he recalls.
By 1986, they had launched a chain of magazines and trade shows throughout South America, and McGovern brought Hippeau to the U.S. to turn around IDG's InfoWorld. Three years later, William B. Ziff Jr., McGovern's staunchest rival, wooed Hippeau to PC Magazine and in 1991 promoted him to CEO of the entire operation. ''Eric will impose order, like a military man,'' Ziff says. ''He doesn't bark orders, but you can always feel the engine underneath.''
Indeed, the soft-spoken, bespectacled Hippeau isn't given to small talk, cracking jokes, or handing out kudos. ''He's a cold fish as a boss,'' says an ex-exec. ''But as a businessman, he's great.'' When he moved Ziff abroad in 1991 with a magazine in Germany, for example, Hippeau hired a security force to surround a Munich printing plant after he heard a rival was trying to get advance copies of Ziff's new PC Professionell. Hippeau has since launched 12 publications in Europe and China for a total of 30 magazines. The publisher licenses its name for another 70 titles.
If the international foray is Hippeau's biggest claim to fame, his idea for an annual retreat for influential clients is a close second. Every year, Hippeau, an avid skier, presides over the so-called ''Boards,'' where computer executives ski and cut high-level deals. Last winter, according to one executive who was there, Microsoft and Sun Microsystems Inc. negotiated to give Microsoft the license to use Java. In March, they agreed to a deal.
Given such cozy relationships, its no wonder Hippeau identifies more with the industry he covers than with the media. ''I consider myself part of the computer industry,'' he says. ''I live, breathe, sleep computers.'' But Hippeau insists that his business dealings don't influence his editorial content. Despite millions of dollars in Windows 95 ad revenues, for example, PC Magazine told its 7 million readers to avoid the program until the bugs were worked out. And after launching Family PC jointly with Walt Disney Co., the magazine panned Disney's online site.
Now, Hippeau is spending $100 million to launch ZDTV, a 24-hour cable channel devoted to computers and the Internet. Many entertainment execs have bashed the idea, particularly coming shortly after MSNBC canceled a Ziff-Davis show with low ratings. ''Ziff-Davis has not proved it can build an audience to get [TV] advertising,'' says Halsey M. Minor, CEO of rival CNET. ''It's virtually impossible.'' But Hippeau is undaunted. That, after all, is what everybody said in the '70s, when he was starting a computer magazine in Brazil.
By I. Jeanne Dugan in New York
Updated Nov. 20, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.