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UCG's spins off second IT firm this year.

United Communications Group (ucg) has taken a big first step in the development of its second spin-off company in information technology (IT), American Petroleum Exchange, with the announcement due next week that through the Exchange UPS is accepting bids for 86 million gallons of fuel for its planes.

"Once we announce this UPS bid we anticipate that a number of other bids (through APE) will follow and give real substance to this electronic business," said Bruce Levenson, a ucg founding partner.

If APE follows in the footsteps of Tech (NL/NL 1/31/00), ucg's first spin-off, the outlook for success appears rosy.

Levenson admitted that the success of APE could severly hurt the most successful part of ucg's business, which is a series of newsletters and data bases dealing with petroleum pricing. But that wouldn't be too painful for ucg's staff since all of them have stock options in the two spun-off IT firms.

"It is the ultimate in cannibalization," Levenson said.

But he feels that APE has the potential to be an enormously successful "blowout" opportunity. Since this is a technology product and not an information product, Levenson said, they hired Technology Partners to help them build the exchange and are working with the likes of Oracle, Arthur Anderson, Ariba, and Sun Micosystems.

"APE was launched out of a challenge inside the company to see if we could change the way petroleum is bought and sold in the U.S.," Levenson said. "Not at the consumer level but at the wholesale level and at the large end-user level with companies like UPS and FedEx. All these companies are customers of ours... and in their contracts with oil companies the price escalation clauses are benchmarked to indexes that we [ucg] generate."

Levenson explained that the UPS transaction will actually occur in October when the company buys 86 million gallons of fuel for its southern region with the fees being cleared through APE. A number of competitors trying to set up somewhat similar technology exchanges, but Levenson sees this as the firs purchase of fuel oil done through an electronic exchange.

UCG has put nearly $25 million of its own money into its two spin-off companies APE and Tech in Boston during the past 12 months and it is looking for further investment capital for both companies.

TechTarget last year launched its first site,, targeted to IT professionals using IBM AS/400 computing systems, Today it has 11 sites aimed at industry-specific search engines like, which serves architects and managers in the data storage field.

Its revenues come principally from ad sponsorships. In July it produced nearly $600,000. It's now launching two new sites a month and has 140 employees, according to Levenson.

"It's working" he said. "It's a real business. The whole idea, as we bring up sites, is to leverage advertisers across multiple sites. That's what we're trying to do."

Following high-tech firms, ucg offers stock options

United Communications Group has found a way to keep the staff of its highly successful and profitable publishing company in place as it pours millions into its two spin-off, start-up IT companies.

Early-stage stock options in these two ventures are offered to all ucg employees, and stock options are set aside for future staff, according to ucg's Bruce Levenson.

Of course, employees of the two new firms are also given stock options--for one reason in order to be able to attract the best in a very competitive industry.

Levenson spends a lot of time "dampening the staff expectation," but it gives them a "financial stake in these ventures," and if the spun-off businesses work "their expectations will be realized."

UCG is a limited liability partnership, but the two new firms, American Petroleum Exchange and Tech are stock companies.
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Author:marshall, jim
Publication:The Newsletter on Newsletters
Geographic Code:1USA
Date:Jul 31, 2000
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