Dataline's Stock Price Surges As Commodity Quote Vendor Targets Lowest Of Low Ends

Dataline, Inc. may be on the verge of finding success in the ever-elusive low end of the market data business. The Omaha-based company, whose stock soared following its recent public offering, has combined cheap data, low technology, and a unique sales approach to gain thousands of customers in the depressed farm belt. [Omaha's Dataline, Inc. shouldn't be confused with Toronto's Dataline, Inc., the Canadian quote vendor. They aren't the same company.]

"Most of our customers are people who have never had electronic market information before," says Roger Broderson, Dataline's chairman and CEO. The traditional customers for commodity market data are grain elevators and feed lots, but Dataline -- with its $19.50/month price tag -- is going after the large farmer, and now claims to serve more than 4,000 of them.

So far Dataline doesn't appear to be affecting the traditional vendors of commodity market information. "Obviously we've lost some clients to them, but very few, relatively few," says Paul Till, the new president of Market Information, Inc. Tom Jordan, chairman of Knight-Ridder Financial Information, concurs: "We've heard of them and we've seen them in some places, but they're really going after a different area of the marketplace than we do [with Commodity News Service]."

Till, for one, speculates that Dataline may indeed have found a new niche. "When things come along and they don't turn your boat upside down, you start to say, 'Well, why didn't it happen?,'" he says. "They are appealing to a market segment which we, or people like CNS, CCC, and so forth, have never really had a valid product offering for."

So far the stock market seems to agree. Although Dataline failed to sell out its recent initial public offering -- it sold only 700,000 out of a possible one million shares -- its stock traded recently at more than twice the offering price of $5.40. Trading opened February 5th at 6 3/8 bid, and the price climbed to 11 1/4 bid on March 6th. Dataline closed at 10 1/4 bid on March 13th.

Dataline is the quintessential no-frills quote vendor (MTR, October 1986). Its service, delivered by FM sideband in several states in the Midwest, comprises 40 pages of delayed quotes from Chicago, cash prices gathered from elevators and feed lots, weather information, and advertising. Subscribers get a data receiver and a small monochrome screen. There is no keyboard. A switch on the front of the receiver allows the user to toggle pages one at a time.

According to Dataline's Broderson, the service seems to be attracting younger farmers with larger-than-average farms. The average size is about 1,200 acres, he says, and 75 percent have annual sales over $250,000. 40 percent, he says, own computers.

Dataline's sales approach is as unorthodox as its customer base, and more reminiscent of Amway Corp. than of traditional quote vendors. More than 300 "farmer-dealers" are out selling Dataline, Broderson says. Not only do they receive commissions for selling Dataline, but they also get part of the commission stream from new dealers they recruit.

4,000 may sound like a lot of customers, but at $19.50/month they don't go very far. The company lost $495,000 in the quarter ended November 30th. It does, however, have $3 million in the bank from its offering. Nonetheless, it's estimated that Dataline will have to hit the 10,000 subscriber level in order to break even.