PhillyDeals: Taxpayer-backed Traffic.com to close Malvern offices

The closing of Traffic.com's Malvern offices, announced last week by owner Nokia's Navteq division, will idle 300 data professionals. That's bad enough.

It is also a blow to people who think the federal government should select which private companies get taxpayer support.

Starting in 2000, Traffic.com consumed $50 million in no-bid U.S. Department of Transportation grants to develop online highway-traffic data, with backing from former Sen. Arlen Specter and former Rep. Bud Shuster (R., Pa.).

The money helped Traffic.com win contracts with Microsoft, Comcast, the Weather Channel, and others. At its peak, it hired more than 600 workers.

But critics in industry and in Congress, some from districts with rival traffic start-ups, complained that the government's favoritism to Traffic.com unfairly pushed competitors out of the market.

A 2009 report by the Transportation Department's inspector general found that Federal Highway Administration officials failed to make Traffic.com share revenue with cities that gave it data, or post that information for commuters, because the company was too busy "addressing congressional interest" in the operation and protecting its financial position. Traffic.com eventually paid cities $1.5 million, including $125,000 to Philadelphia, DOT spokeswoman Nancy Singer told me.

Taxpayer backing failed to keep Traffic.com dominant in the face of competition from services such as Google Maps, which uses data from Traffic.com and other sources. Nokia told me it would keep Traffic.com for now, moving work to Boston and Chicago. The arrangement with the Transportation Department ends in 2014.

Despite its business reverses, Traffic.com showed returns for its investors and owners, who split $179 million when it was bought by Navteq in 2006.

Among those Traffic.com backers was TL Ventures, whose clients include Pennsylvania state retirement funds; former Traffic.com chairman Mark J. DeNino, a TL partner; and past Traffic.com manager David Jannetta, an ex-mayor of Altoona and a Shuster ally; among others.

DeNino and Jannetta, now a partner at King of Prussia-based Alara Capital, didn't return calls asking for comment on what we've learned from Traffic.com and its taxpayer investment.

A.C. Moore Arts & Crafts Inc., the store chain based in Berlin, N.J., said Tuesday that it had been sold to one of its suppliers, Sbar's Inc., of nearby Moorestown, for $1.60 a share, or about $41 million.

That's better than Moore's recent penny-stock price, but just a fraction of Moore's previous high of more than $30 in 2005, and $5 two years ago. Moore competes with national chain Michaels Stores, among others.

Sbar's boss, Pepe Piperno, wouldn't say what the sale would mean for Moore's 100-plus stores or for its 767,000-square-foot warehouse and office.

"Investors in this company are thinking this is the best thing, given the lack of cash," Mark Mulholland, who runs the $55 million-asset Matthew 25 Fund in Jenkintown, told me. He said the company's headquarters alone should be worth at least $30 million.

Mulholland said he sold the stock around the time founder Jack Parker left the company in 2006. Moore opened stores up and down I-95, but sales fell every year after peaking at $589 million in 2006. As losses mounted, the stock price fell below the value of the company's inventory, Mulholland said. Moore said in February that it was weighing a sale.

Philadelphia investment bank and brokerage Janney Montgomery Scott advised Moore on the deal. Janney's research department made alternating "buy" and "hold" recommendations on Moore stock before dropping coverage in 2008.

That cheerleader-to-undertaker pattern recalls Janney's record at Tasty Baking Co. before the Philadelphia snack-cake-maker's sale earlier this year. Janney officials didn't return calls seeking comment.