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Is this why Divine Inc. is screwing small dotcoms?

Robbed Peter, now mugging Paul

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Update Divine Inc., the dotcom tithe firm, has been a very, very naughty company indeed.

Last year, Rowecom, a subsidiary of the Chicago-based firm, collected $50m-worth of subscriptions for magazines and periodicals and libraries on behalf of sundry publishers. Only, Rowecom spent the money on paying down debt and covering costs, as opposed to handing over the money to its rightful owners, Divine execs reportedly say.

So how does this differ from theft? Err ... we're stumped too. According to the Chicago Tribune (reg req'd), a deal is being hammered out which would see Rowecom's assets taken over by Swets Blackwell, a Dutch rival. "A person familiar with the matter said Divine would pay $20 million, under one version of the arrangement, and agree to a lien on future earnings, should Divine become profitable," the paper says.

The Librarian's Enron

The Divine scandal has been bubbling away in the US library world since late December, when Rowecom told publishers that it was unable to make its payments. Gary Price, a consultant librarian, has done a good job of covering the unfolding events on his web site ResourceShelf.com. As you might expect from a reference expert, there are plenty of links. To save you scrolling - it's a blog -, look here, and here. And here

To err is Human. To err is also Divine

Of course, Divine faces a huge potential legal liability, from libraries which paid the bills in good faith, as well as publishers. And that could scupper any arrangement cobbled together in this less than Divine intervention.

In recent months, Divine Inc's patent lawyers have treated themselves to a vigorous letter-writing and court-threatening campaign to extract royalties supposedly due from small dotcom firms. A lot more Web sites will have to cough up to these egregious demands before Divine fills the massive hole blown in its finances by Rowecom's cavalier treatment of other people's money. Of course, it could always go bust first.

In an email briefing sent to clients (republished on ResourceShelf), a librarian industry consulting firm called Outsell notes:

Financial perspective: divine's cash was down to $30 million this June. In August, it received an equity investment of $61 million from Oak Investment Partners. One month later, the company reported total cash of $61 million - the equivalent of the Oak investment, but the $30 million of its own cash from June was gone. Current market valuation has the company worth $28 million, less than half of the Oak investment.

Divine's patent lawyers are probably on contingency fees, so the company's financial crisis will not affect the dotcom tithe campaign in the short term. But even success-only fee lawyers will find it difficult to act for a bust business. If you can, sit tight and wait for the inevitable class actions, and cash haemorhhage to do their bit. ®

Related Story

Divine Inc. extracts dotcom tithe from UK firm

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