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Auctioning Off An Empire

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Mudslinging is a common practice in computer publishing, where three powerful and zealously private companies vie for a $1.8 billion market. Even so, Eric Hippeau had heard enough. The chairman of Ziff Communications Co. was patiently responding to claims from rival publishers that Ziff had peaked in its growth, was out of step with the computer industry, and so forth. "Maybe we should start saying nasty things about our competitors," he said tartly.

Hippeau can ill afford such criticism just now. On June 10, the Ziff family announced that it was putting its giant publishing company on the block. Lazard Frres & Co., which is running the auction for the family, thinks Ziff can fetch roughly $2 billion. Dirk E. Ziff and Robert D. Ziff, sons of the company's retired billionaire owner, William B. Ziff Jr., plan to plow the proceeds into a new investment company.

The younger Ziffs may wind up with less pocket money, though, if they can't shake widespread industry gossip that they're bailing out of a business whose best days are behind it. "Ziff has been unable to move out of its position in the PC market," says Michael S. Leeds, president of rival CMP Publications Inc. "They do not have a good track record in starting magazines."

TAINTED CAVILS. That's not likely to deter suitors such as K-III Communications Corp., which could ride Ziff's existing magazines to instant dominance in the computer field. Publishing executives note that other rumored buyers, such as Reed Elsevier PLC and BUSINESS WEEK's parent, McGraw-Hill Inc., could use PC Magazine and other Ziff titles to bolster their presence in the market. And one can attribute some of the cavils of Ziff's rivals, CMP and International Data Group Inc., to the fact that the family excluded them from the auction.

Nevertheless, there's no denying that Ziff's torrid growth has slowed. Advertising pages are down at key titles such as PC Magazine, MacWeek, and Windows Sources for the first five months of 1994. The company managed to eke out growth in advertising revenue because rising circulation allowed it to boost ad rates. But overall, Ziff's share of U.S. computer ad revenue dropped from 53% to 50%, according to market researcher Adscope. In contrast, IDG's share rose from 24% to 26%, while CMP was up from 15% to 16%.

Ziff's problem, outside experts say, is that it became overly dependent on the explosive growth of personal computers. During the 1980s, the trio of PC Magazine, PC Week, and PC Computing were virtual bibles for consumers choosing among Compaq, Dell, and a host of cut-rate PCs. Now, though, most of the low-cost manufacturers have disappeared, and the PC market no longer generates as much advertising.

Ziff has also adapted fitfully to the industry's new focus on networks instead of stand-alone PCs. It launched Corporate Computing in 1992 for this market but shut it down after some $17 million in losses.

The Ziff brothers say they aggressively cover networking in special editions of PC Magazine and PCWeek and through their trade-show division. Robert Ziff also downplays the company's loss in advertising market share: "I hardly think this is the harbinger of a long-term trend." Indeed, Ziff expects record revenues of $1 billion in 1994. Executives close to the company say it could generate $150 million in cash flow. As for new ventures, the Ziffs point to their on-line service, Interchange, which starts this fall.

Right now, media executives give the edge in the bidding to Reed, the Anglo-Dutch publishing giant. With a trade-show company that complements Ziff's, Reed has every reason to make a move. Whether it would pay top dollar for a company whose ad growth has stalled is another question.Mark Landler in New York

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