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Tuesday January 11, 9:36 am Eastern Time
Company Press Release
Giga Information Group Issues Letter to Shareholders
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Jan. 11, 2000--Robert K Weiler, chairman and chief executive officer of Giga Information Group (NASDAQ:GIGX - news), sent the following letter, dated January 11, 2000, to Giga stockholders:
Dear Fellow Investor:
As we enter a new fiscal year--and new millennium--I'd like to take this opportunity to formally introduce myself as your chairman and chief executive officer. I also would like to use this letter to summarize what I believe were our greatest challenges and accomplishments this past year. More importantly, I plan to share with you my thoughts on the coming year and what Giga Information Group is doing to capitalize on the growth in Internet and e-business consulting.
First, let me tell you briefly about my career and how I came to join Giga. Before joining the company, I was president and CEO at Eastman Software, formerly Wang Software and a wholly owned subsidiary of Eastman Kodak. Prior to that, I was senior vice president of worldwide sales and marketing for Lotus Development Corporation, where I headed the introduction of LotusNotes. I also served as president of several Massachusetts-based IT companies, including Cullinet Software and Interleaf. I've gained an in-depth view of the information technology arena through these roles. I believe that the niche served by Giga--providing research and consulting to companies that are exploring their e-Business strategies, as well as to IT vendors--has vast opportunities for growth.
My introduction to Giga actually began a few years ago, while I was at Eastman Software. In that role, I was able to gain a first-hand look at the company as one of its customers, using Gigaweb research and working with its analysts. I found that what differentiated Giga from its competitors was the superior quality of its research and its analysts. I also appreciated the fact that I was not ``assigned' to one analyst, but instead received the benefit of a number of analysts who collaborated on each project to bring me the best collection of knowledge available. Thus, when I was asked to consider joining Giga as president and chief executive officer, I started with a very favorable impression.
As I began my due diligence on the company prior to making my decision, I spoke to Giga employees and many people outside the company. What I was told over and over again simply validated my original view. The widely heralded reputation of the firm's analysts and research products is a hallmark of the company. The retention rate of our analysts is very high, and I am dedicated to making sure that Giga is viewed as a workplace in which the best people wish to pursue their careers.
In the end, I was captivated by both the challenges we faced and the great opportunity for our services. I joined officially as president and CEO in August, and in October I was also appointed chairman. Until now, I've had to be internally focused. Our organizational and cost control issues are now being fixed; we are repositioning our teams to better exploit both new and established lines of business; and we have developed an exciting strategy and direction. There's still more to do in communicating Giga's position as the e-Business Advisor, but I am now shifting gears and directing more of my time and energy on being sure that our current shareholders--and potential investors--understand how the company is evolving and how we will grow.
Accomplishments and Challenges
I am still a relative newcomer to Giga, and therefore believe I can be objective about our strengths and weaknesses. We have come a long way from our start in March 1995 and our initial public offering in July 1998. Although we will not report our audited financial results for fiscal 1999 until early February, we expect to report an improved fourth quarter, with fiscal 1999 revenues approximately 33% higher than in 1998 and a reduction in losses. We also signed up our one-thousandth customer and reported more than 118,000 licensed users.
When I joined Giga, there was concern not only about our financial position but our future direction. Although e-Business skills were becoming an increasingly important asset to consulting firms, Giga was not structured to take advantage of this trend. Exacerbating the situation was the fact that our Year 2000 consulting work was, as expected, diminishing during the year. Our priority on dramatic revenue growth cut deeply into the bottom line and consumed our cash.
In my mind, the three major challenges we faced were:
Financial stability
Productivity of the sales organization
Lack of a clear strategy and execution plan to take advantage of our extensive knowledge of Internet delivery and e-Business
My immediate task was to respond to these challenges and to make some changes so that we could be successful in the coming years. On the financial side, we implemented a stringent review of our spending plans and unforgiving cost controls. You'll see the results of these efforts starting in the fourth quarter of 1999 and continuing through the year 2000. We also expanded our sales efforts to actively replace Y2K consulting work, and I'm pleased to say we have replaced this work with new consulting or advisory business.
Productivity of the sales organization was a great concern, as we'd experienced heavy turnover among the sales force and a significant loss in productivity. We now have centralized our sales force, established a new compensation system and territory plan, and instituted a number of efficiency measures.
The third challenge--to set a strategy and execution plan focused on e-Business--is well on its way to being solved.
You have probably seen hints of our new strategy in our web site and recent news releases. We will build upon our legacy of excellence, objectivity and collaboration, but will be focused on e-Business. Our clients now have available prescriptive consulting accompanied by roadmaps for effective implementation strategies. We believe this will define an entirely new model for our industry, and will put us squarely in the center of helping organizations adapt to and capitalize on the new digital economy.
Our e-Business Strategy
Our new marketing theme is ``your e-Business advisor,' and this will drive our sales and marketing activities. What brings that theme to life is the infrastructure we put in place to support the e-Business strategy.
First, our core business, the advisory and consulting services provided on a subscription basis to our customers, will have an even greater infusion of e-Business content. During our strategic review, we confirmed that we possess a solid base of e-Business content and expertise from which to build.
Second, we have launched an ePractices Group headed by Larry Paul. Larry joined us from Carrier Corporation, where he was instrumental in the implementation of the company's e-Business initiatives. What prompted the creation of this group was a growing need by our customers, particularly at the chief information/chief technology officer level, for benchmarking their organizations' technology approach and uncovering the best IT/e-Business practices throughout the world. Our ePractices Group includes former CIOs and business strategy executives whose focus is not only on the what (identifying the best practices) but on the how--how can you take your present organization and get to the best practice level. The ePractices group is unique; no other company offers this type of service. Some of our customers for ePractices include Gillette, Reuters, Federal Reserve Automation Systems and Bristol Myers Squibb. Third, in November, we announced a new product: the Web Site Scorecard(TM). This comprehensive service evaluates an organization's web site, provides a detailed analysis, and compares it to the competition and to best-of-breed sites. A quantitative tool that evaluates web sites in 17 categories using 200 separate items, it is also the first to measure an organization's compliance with the proposed Standard for Internet Commerce, guidelines for e-commerce best practices supported by more than 300 business, community and government organizations. We're already signing up a number of well-known companies as Web Site Scorecard users, including Anheuser Busch, JP Morgan, Lotus, US West and Hyatt Hotels.
The Year 2000
If we execute successfully, we'll hit a number of milestones in the coming year. First, we plan to achieve operating profitability in the fourth quarter and a positive cash flow in three out of the four quarters. This will result from top-line growth, continued cost control (although we will be making investments in sales and marketing, particularly in support of our e-business initiatives), and the higher margins resulting from our ePractices and Web Site Scorecard service lines. I expect that revenues in fiscal 2000 will be about 30 percent higher than in fiscal 1999, and while this represents a less aggressive growth posture than we've had in the past, we believe that achieving profitability with an admirable revenue growth rate is far more desirable than achieving dramatic top-line growth and net losses.
Qualitatively, we want to continue to build the quality and reputation of our advisory services and leverage our customer base. We are also looking forward to the launch of Gigaweb 3.0 in the first quarter. This upgrade to our existing Gigaweb 2.0 will be a dramatic improvement to our Internet delivery model of research. Gigaweb 3.0 will introduce a revolutionary change in the research community by creating ``knowledge salons,' providing living research to our customers.
What we want to change, though, is the ``grow-it-here' mentality that's been part of Giga's orientation. We would like to form strategic alliances and partnerships where it makes sense, and I anticipate at least one significant announcement in 2000 along these lines.
Finally, I believe that as we implement our e-Business strategy and move our financials in the right direction, we'll be rewarded by more attention from the financial community. The people of Giga are working hard on the operations and execution. I am committed to improving our communications and keeping you informed on what we're doing, as well as building a wider audience of investors. I look forward to keeping you informed on our progress.
Sincerely,
Robert K Weiler
Chairman and Chief Executive Officer |
