GSCP 10-K - Management Discussion and Analysis of Financial Condition and Results of Operation
Overview
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
Overview
GlobalSCAPE develops and distributes Internet related software including file management, content management and Web development tools. We distribute our software primarily via download from our Internet website. During 2004, approximately 64% of our revenues were generated from customers within the United States, with the remaining 36% concentrated mostly in Western Europe, Canada and Australia. CuteFTP and CuteFTP Pro accounted for approximately 75% and 69% of total revenues in 2003 and 2004 respectively. Combined sales of these two products declined approximately 7% from 2003 to 2004. This decline was primarily in sales of CuteFTP, which declined approximately 36%. Sales of CuteFTP Pro increased by approximately 41% year over year and sales of Secure Server, a companion product to CuteFTP Pro, increased 107%. Secure Server accounted for approximately 14% of total revenues in 2004, increasing from 7% of total revenues in 2003.
Substantially all software products ultimately reach a point in their lifecycle in which sales can be expected to plateau or decline. While it cannot be determined with certainty, CuteFTP and CuteFTP Pro may have reached such a point their lifecycles. Management believes that the market for stand-alone FTP clients for home consumers may be declining. However, we have not seen the same decline in the market for secure FTP clients and servers such as CuteFTP Pro and Secure Server which we believe better target the needs of businesses.
Our strategy is to continue enhancing our file transfer products across the board to meet the demands of both individual and enterprise users, while improving the security features of our current product line. We dedicated considerable resources in the fourth quarter of 2002 and in 2003 to the development and market launch of PureCMS, our content management product. To date, we have not been as successful in selling this product as we had anticipated. We laid off 9 of 45 employees on February 12, 2004 in order to bring our expenses in line with our current operating performance.
We are encouraged with the interest we see in our new enhanced file transfer offerings so far in 2005. We will continue to address security issues for our customers. We intend to release new versions of CuteFTP, CuteFTP Pro and Secure Server early in 2005 and we believe we can slow the decline in sales of CuteFTP and improve sales of CuteFTP Pro and Secure Server. We plan on releasing additional versions of EFT throughout 2005.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements for the years ended December 31, 2002, 2003 and 2004 and related notes included elsewhere in this document. |
