Software // Information Management
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2/24/2009
07:56 AM
Seth Grimes
Seth Grimes
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Infonic Reloaded, or the Liberation of Lexalytics

I have been following the recent implosion and regeneration of text-analytics, document-management, and Sharepoint services provider Infonic. The imbroglio affects subsidiary Lexalytics, which doesn't deserve the taint of guilt by association. I've concluded that the story bears exploring and that Lexalytics, given what I know of its products and management, should come out fine...

I have been following the recent implosion and regeneration of text-analytics, document-management, and Sharepoint services provider Infonic. The company recently went into administration in the United Kingdom due to insolvency. (I reported on the impending train wreck last month.) Infonic was reconstituted under new-old ownership of, reportedly, a couple of its executives. Many (former) shareholders are upset. I feel like a voyeur because this imbroglio affects Infonic subsidiary Lexalytics, which doesn't deserve the taint of guilt by association. I've concluded that the story bears exploring and that Lexalytics, given what I know of its products and management, should come out fine.

The Company X that I wrote about last month was Lexalytics. It should have been, directly, Infonic, given that Infonic is and was the troubled partner in the merger of the two companies, which was announced last summer. The merger terms called for Infonic to own "between 70% and 75% of the issued share capital of the Vehicle (Infonic's percentage being dependent on certain conditions)." I critiqued the valuation of the deal in a July blog article.In retrospect, I didn't dig deeply enough last July. I missed signals of impending trouble. On February 3, I found an Infonic page (no longer on-line, but cached by Google), a press release stating "Interim results for half year to 30 June 2008 report 42.5% revenue increase." Following a link, you get a report (that is still on-line) with stats that seem to include Lexalytics revenues even though the Lexalytics merger wasn't announced until July 28, 2008, after the close of 2008 1H, and didn't close until December 1, 2008.

As I reported last month, albeit in veiled fashion, trading in Infonic shares was halted January 22. Infonic shares traded that day at 1.125 pence, down from over 4 pence at the time of the merger. The share price hit a 52-week low of .75 pence on October 23. The number of shares outstanding was diluted from 77.82 million on June 30, 2006 to 269.71 million at the time of the July merger announcement just two years later. See a Reuters page for IFNC.L stats.

The Infonic-Lexalytics merger closed on December 1, 2008. According to Lexalytics Ltd CEO Jeff Catlin, Infonic's ownership stake was below the projected 70-75%, but the Lexalytics folks nonetheless do not have a controlling interest in their company.

Infonic was declared insolvent and an administrator appointed on February 3 with the explanation, "the Company has been unable to secure further funding." Interested parties were required "to submit their best and final offers by 12:00 noon on Wednesday 4 February 2009," the next day. Acquisition by Lake House Capital Ltd. for £3.5 million was announced on February 10. Market valuation at the time was £3.27 million; I do not know company liabilities, nor to whom the £3.27 million went. Worthy of note is that Lake House Capital was registered on January 22, 2009, the day IFNC.L shares last traded and less than two weeks before Infonic Plc went into administration.

It seems that as part of the overarching process, Infonic CEO Mark Thompson filed insolvency papers for component/subsidiary/predecessor Corpora Software — I don't know its (former) status, just that it was the source of Infonic's text-analytics technology — on December 18, 2008.

What of Lexalytics? CEO and co-founder Jeff Catlin and his colleagues are, so far as I can tell, victims of the Infonic situation. I believe that clearing the air will help Lexalytics in the longer term. I posed several questions to Jeff who responded to the best of his ability.

  • All Infonic text-analytics products are now in Lexalytics' hands. [This means that this article, given that I cover text analytics but not Infonic's other areas, may be the last I write about Infonic. Text analytics folks: cross Infonic off your list.]
  • Infonic's marquee text-analytics customers, Factiva and Thomson Reuters, are now Lexalytics customers.
  • The Infonic situation has not affected Lexalytics' ability to close deals. "It has just made my work a little harder."
  • Lexalytics is experiencing its best sales quarter ever.
  • Lexalytics' operations are funded by revenues.

Jeff says he's going to London this week to sort out ownership questions. Otherwise, he appears to be looking forward, with a full plate of projects and prospects; text-analytics vendors report doing quite well despite current economic conditions.

It's "meet the new boss, same as the old boss" Infonic that I anticipate will face business challenges going forward. Expect (former) shareholder lawsuits and questions about corporate status. The situation is not totally bleak however. Lexalytics CEO Jeff Catlin says Infonic's document-management business "is actually pretty solid." That the Infonic Geo-Replicator for Microsoft Sharepoint "has been the problem," according to Jeff, "is well known" publicly.

Infonic CEO Mark Thompson did not respond to a telephone message left with a staffer or to an e-mail message I sent with questions about Infonic and Lake House Capital and requesting general comment.


N.B.: I posted a number of revisions to this article, adding detail, in the six hours after this article initially appeared.I have been following the recent implosion and regeneration of text-analytics, document-management, and Sharepoint services provider Infonic. The imbroglio affects subsidiary Lexalytics, which doesn't deserve the taint of guilt by association. I've concluded that the story bears exploring and that Lexalytics, given what I know of its products and management, should come out fine...

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