The company also reported a 77 per cent decline in first quarter pretax profit to pounds 425,000, while quarterly sales slid 4.7 per cent to pounds 42.7m from the year before. Dialog blamed the shortfalls on the cost of investing in electronic commerce and web solutions products as well as a 10 per cent price cut in September related to moving products to the Internet.
Created by the pounds 261m reverse takeover of Knight Ridder Information by Maid in 1997, Dialog had delayed the results until the last legal day with the aim of simultaneously announcing a financial and strategic reorganisation.
Its immediate challenge is to find backers to alleviate the cash drain caused by the pounds 165m in debt used to help finance the KRI acquisition. Dialog is also seeking alliances and licensing agreements to increase the number of customers able to access its on-line databases.
Maid founder Dan Wagner, who holds an 11 per cent stake, promised that talks with potential partners, including some US companies, would result in a "flurry of activity" to help ease Dialog's debt burden and improve distribution links.
"Dialog needs to reassure the market that it can meet expectations before investor sentiment will turn more positive," said Patrick You, analyst with Nomura. "Before that happens, buyers of the stock will be taking a risk."
Dialog stock closed down 13p at 91p in heavy trade of 4.1 million shares. At the time of the KRI buyout Dialog launched a rights issue at 220p per share. At one point, Dialog's on-line database was judged a key strategic asset. But the ubiquity of information available over the Internet has checked the company's ability to increase its customer base.