Unpleasant report on Open Market taken from Yahoo board:
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Tuesday, July 07, 1998
Open Market: Tough Sell To Meet Expectations
By Kimberly Weisul
June 16, 1998 11:06am
Inter@ctive Week
As market analysts lower their revenue expectations for Open Market Inc.'s
second quarter, the e-commerce software developer insists it's ahead of its
time. The problem: The company may be having trouble closing sales in this
high-stakes arena.
Jay Somaney, an analyst at Hoak Breedlove Wesneski, says Open Market
has been hinting that second-quarter numbers may be weak.
The current consensus estimate is for Open Market to lose 12 cents per
share in its second quarter. Just four weeks ago, analysts expected the
electronic-commerce software maker to lose 8 cents per share. Somaney
now expects second-quarter revenue of $17.5 million to $18 million.
Company executives would not comment on second-quarter sales.
James Preissler, an analyst at PaineWebber Inc., writes in a research report
that he expects revenue for the period to be $17 million. Counting on strong
growth in the second half of the year, Preissler pegs 1998 revenue at $81
million, a 33 percent rise over 1997's revenue.
Even if Open Market hits those targets, it would lag growth in the
e-commerce software industry, according to Forrester Research Inc.
Forrester expects the overall market for e-commerce software, estimated at
$121 million in 1997, to grow 94 percent to $235 million this year and to
$3.76 billion by 2002.
"The bulk of the marketplace today is just getting their feet wet, and it'll be a
few years until you see the shift to off-the-shelf applications," says Rob
Weinberger, vice president of Open Market.
Open Market (www.openmarket.com) was unable to meet analyst
expectations for its first quarter ended March 31. The company was
expected to lose 15 cents per share, but instead lost 18 cents, or $5.8
million. Revenue, at $15.2 million, was also about 10 percent below analyst
forecasts.
Zona Research Inc. analyst Vernon Keenan says potential Open Market
clients may be "balking at the high price of the product vs. their ability to craft
a custom solution in-house."
Open Market Chief Executive Officer Larry Eichorn put it differently at a
recent investment conference hosted by PaineWebber: "Large corporations
are in denial. They think they can build their own systems."
Keenan says the total cost of implementing Open Market's software can
easily run to $500,000 and a six-month implementation cycle.
But Open Market's Weinberger says the average selling price for the
software and a service contract to a corporate customer runs from $200,000
or $250,000, and that building a system from scratch is more expensive. He
says Open Market software is more expensive for customers he terms
"commerce service providers," such as banks, telecommunications
companies and Internet service providers that use Open Market to offer
e-commerce. Those packages run approximately $350,000 to $500,000, he
says, and Open Market receives transaction payments from those systems,
as well.
Forrester says the cost of starting an e-commerce site can range from $5.1
million to $23.1 million for a site that can handle 50,000 customers.
Open Market was unable to meet analyst expectations for its first quarter
ended March 31
Source: Inter@ctive Week |
