BUSINESSWEEK ONLINE : MAY 17, 1999 ISSUE
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INTERNATIONAL -- EUROPEAN BUSINESS

The Rise and Rise of an Italian Cyberplayer (int'l edition)
Paolo Panerai is parlaying his media group into a Net power

It's a funny thing about Paolo Panerai, the founder and chief executive of financial publisher Class Editori. At Santini, a popular Milanese restaurant, the news on the market monitor perched above the bar is stunning: Class shares have broken another record--which means that on this rainy afternoon in early May, Panerai's stake is worth almost $500 million. But Panerai doesn't even glance at the screen. ''It's all virtual money, since I haven't sold a single share,'' Panerai says. The 52-year-old Tuscan is far more interested in describing his new online publishing projects. ''I just want to make independent newspapers.''

Who says journalists never get rich? In the 13 years since he launched Class, the reporter-turned-publisher has built a stable of 15 publications, including the weekly Milano Finanza and several online financial news services. Panerai's strategy is simple: Stay clear of the industrial conglomerates that control most Italian media. Although Class has yet to make a profit on its new cyberventures, the Milanese market has already made it a big Internet play. On May 4, the stock closed at $9.76, 430% above its initial offering price last November.

Class caught fire in January when Panerai agreed to supply analysis and graphics to Fin-Eco, the online trading startup launched last year by Gruppo Bipop, the Brescia banking group. Fin-Eco is emerging as Italy's most aggressive online broker. And when clients trade, Class takes half the commission.

More recently, Panerai cut a six-year deal with Cad, a financial-software group in Verona. The two companies have developed an online trading program aimed at Italian banks. Since most of them already use Cad's software to settle share transactions, the Cad-Class package is a fast, inexpensive way for banks to get into online trading services. For Class, the deal promises not only a cut of commissions but also new clients. By 2003, says a recent report by ABN Amro, Class's revenue from online trading could approach $40 million.

That's enough to make Class a top Internet stock. Europe has virtually no companies entirely dedicated to Internet business. That leaves investors flocking to media outfits such as Class that are pushing into online ventures. With supply limited, the action can get feverish. Class's stock is now selling at more than 800 times prospective earnings per share. ''This is a company worth almost $1 billion that had hardly any earnings a couple of years ago,'' says a surprised Flavio Cereda, an analyst at Lazard Capital Markets in London.

Back in the real world, Class lives on what has always sustained it--ad sales, subscriptions, and other traditional sources of income. Milano Finanza, for which Panerai still writes a witty, well-informed column, sells 120,000 copies a week and contributed a third of Class's $75 million in revenues last year. Group profits last year were $9.4 million, vs. half a million dollars in '97.

Class grew from Panerai's ability to spot new market opportunities and develop niche products to fill them. While he was still a reporter in the 1970s, Milan's Rizzoli publishing group asked Panerai to launch a glossy business monthly called Capital to cater to a rising class of professionals and managers. Within a few years, it was among the most profitable magazines in Europe.

GOOD TIMING. But when an investment group led by Fiat took over Rizzoli in 1984, the move brought Panerai to another turning point. Suddenly, Capital's reporters wouldn't write critically about Fiat. ''That's when I thought there was a niche for a truly independent outfit,'' Panerai says. He soon started publishing Milano Finanza, and the timing was perfect: Italians were falling in love with stocks, and the paper, rich in analysis and graphics, was an immediate success.

The new online projects won't catch up to Panerai's big earners any time soon. Print advertising, traditionally far below levels reached elsewhere in Europe, is booming in Italy. And the fastest-growing segment is financial services, for which Class's papers are a natural outlet. Still, the day may come when the shift into cyberspace will be seen as another astute Panerai move. ''Panerai is one of the few people in Italy who understands the potential of the Internet,'' says Alessandro Foti, Fin-Eco's CEO. For now, that's good enough for Italian investors.

By John Rossant in Milan

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