CDK Global has been examining their online marketing company, not long after losing an exclusive agreement with General Motors.
CDK, a software developer for auto dealerships, recently announced that they have decided to divest themselves from their online marketing efforts and focus on their car software services. They stated the company may sell off their assets of the online advertising within North America and parts of their retail services for mobile and websites within North America.
The company's revenue within North America dropped by 18% and the company's CEO, Brian Krzanich, stated that their unit "has continued to be a headwind on total company growth."
CDK wants to finish this effort within the next year and is teaming with Allen & Co. to find potential purchasers.
The company's online marketing company is around 19% of their overall revenue and 13% of pretax income.
CDK's 2018 year had their retail segment brought in $1.6 billion in revenue, their advertising unit brought in $305 million in revenue, and their car software business was 85% of the company's overall revenue.
The online advertising company was really hindered when General Motors told all their brands that they could use alternatives to CDK. CDK's advertising had been the go to provider and operator of dealership websites.
CDK's CFO, Joseph Tautges, discussed these changes during a third quarter earning call.
"Depending on the final construct of the multivendor programs, we expect there will be changes to the services we provide today and the number of GM dealers we serve, with corresponding financial impacts that start in Q4 of this fiscal year and build as we move into fiscal 2020," he said.
Krzanich also stated recently about the company's decision to divest.
"We believe the digital marketing business is an attractive asset for someone who is better positioned to leverage the technology platform and management team that we have built," he said in a statement. "During this transition period we remain committed to our CDK Digital Marketing customers and will continue to support our comprehensive suite of digital marketing technologies and services."
With the beginning of their fourth quarter, CDK stated they will offer their online advertising as a discontinued service.
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