R. H. Donnelley (RHD)

R.H. Donnelley Corporation is one of the largest Yellow Pages and online local commercial search companies in the country. RHD publishes directories under the Dex, Embarq (formerly Sprint), and AT&T (formerly SBC) brands. The company provides marketing solutions to companies via its print directories, Internet Yellow Pages, and search engine marketing (SEM) and search engine optimization (SEO) services.

In 2007, the company served more than 600,000 national and local businesses throughout 28 states. The company has approximately 1,900 sales representatives and more than 4,400 total employees. RHD publishes and distributes directories in growing markets such as Albuquerque, Denver, Las Vegas, Orlando, and Phoenix. The company also serves major markets including Chicago, Portland, Naples/Ft. Meyers, Salt Lake City, and Seattle.

BUSINESS OPERATIONS

RHD promotes its "Triple Play" integrated marketing solution, whereby the company provides businesses with print Yellow Pages, Internet Yellow Pages (IYP) and search engine marketing/optimization (SEM/SEO) services.

Print Yellow Pages

RHD offers basic listings in its print Yellow Pages directories to businesses at no charge. These listings include business name, address, and telephone number, listed in alphabetical order in the pertinent category.

Companies may choose to enhance their listing via a variety of options. Businesses may pay to have their listings highlighted or displayed in bold typeface, and may purchase additional lines to list business hours or a description of the company. Businesses may choose to purchase in-column advertising on the page of their standard listing, or to purchase a display advertisement containing information, illustrations, photography, and logos. Display ads are normally placed in order of size and then by advertiser seniority. Display ads may vary in size from a quarter column to as large as two full pages.

Further advertising opportunities are available for a premium price to the in-column or display ads. These include full-color inserts, cover items, delivery bags, coupons, and various other advertisements.

In addition to the print Yellow Pages directories, RHD produces print white pages directories for Qwest, Embarq, and AT&T. RHD's agreements with Qwest and Embarq run through 2052, and the agreement with AT&T runs through 2054. As stipulated in these agreements, RHD provides print white pages directories to every residence and business in a given area. The white pages directories also allow for advertising options.

Internet Yellow Pages

Previously, RHD had maintained separate internet presence for its various regional areas. In the company's AT&T and Embarq regions, the company's internet-based directories were simply online versions of the print directory, as opposed to a local destination search site. Sites such as chicagolandyp.com were maintained by the company, containing information about the targeted market as well as directory search capabilities.

In the company's Dex Media regions, RHD operated dexonline.com, which included fully searchable content from more than 600,000 Dex Media Yellow Pages ads. The site contained more than 16 million business listings and 140 million residential listings. DexOnline.com was the number-one ranked internet yellow pages site in the Dex Media 14-state region for the past four years.

In April 2007, RHD announced a new branding strategy, whereby the company would be rolling out Dex-branded products and solutions in the company's AT&T and Embarq markets. While the company s print directories in those areas will now be branded as "AT&T Real Yellow Pages published by Dex" and "Embarq Yellow Pages brought to you by Dex", RHD will migrate all of the company's online properties to one unified site, DexKnows.com. The site launched in June 2007 with the conversion of the DexOnline.com site, and the company converted its other existing online sites to the DexKnows.com site over the remainder of 2007.

Search Engine Marketing / Search Engine Optimization

The final component of RHD's "triple play" solution is comprised of search engine marketing (SEM) and search engine optimization (SEO). This segment enables businesses to better market themselves on the internet via search engine advertising and search results. In September 2006, RHD acquired Local Launch, a SEM/SEO company. The acquisition was made in order to support the expansion of RHD's existing efforts in this segment.

ACQUISITIONS

The company has grown substantially via a number of acquisitions over the last five years.

In January 2006, the company acquired Dex Media for an aggregate purchase price of $9.8 billion. The price represented a multiple of 10.4x projected 2006 EBITDA at the time of acquisition. The acquisition included publishing agreements with Qwest that extend through 2052, and the acquired company now operates as Dex Media, Inc., a wholly-owned subsidiary of RHD. Through the subsidiary, RHD publishes directories in 14 states throughout the Midwest and Western United States.

In September 2004, the company acquired the directory business of AT&T (known at the time as SBC), for a purchase price of $1.4 billion. As a result of this acquisition, RHD became the publisher of AT&T branded yellow pages in Illinois and northwest Indiana.

In January 2003, the company acquired the directory business of Sprint-Nextel (known at the time as Sprint), for a purchase price of $2.3 billion. As a result of the transaction, RHD became the publisher of Sprint yellow pages in 18 states. In May 2006, Sprint spun-off its local telephone service as Embarq, and as such, the directories are now published under the Embarq brand.

In July 2007, RHD announced that it had signed a definitive agreement to acquire Business.com, a business search engine and directory and pay-per-click advertising network. The $345 million acquisition is intended to further the company's efforts in expanding its online presence. RHD outbid other potential buyers including Dow Jones, New York Times Co., and News Corp. With expected 2007 EBITDA of $12 million, RHD paid a rich multiple of approximately 29x. However, the company is profitable and growing rapidly. In terms of scale, Business.com was projected to generate revenues in 2007 of $57 million, representing just over 2% of the combined company's projected total 2007 revenue.

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