Leading Consumers Through the E-commerce Maze We are initiating coverage of Calico Commerce with an intermediate-term Accumulate and a long-term Buy.Our initial price objective for CLIC is
$72, based on a 37x multiple of CY 2001 revenue of $64.2 million.
The Internet is allowing many businesses to act and appear
to be much larger than they would under a traditional
distribution network. As the reliability and utility of
conducting transactions over the Internet becomes
accepted broadly, the need increases to provide all the
capabilities and benefits of a direct sales force in an on-line
experience. This means:
1) being able to attract and retain customers through the
Web experience (building affinity and brand identity
as potential customers visit your site);
2) personalizing the interaction so that the customer feels
unique, also known as “mass customization”; and
3) guiding the customer through complex transactions
on-line, selling products with a high degree of “touch”
in an automated fashion.
We see Calico's business as the flip side of the Ariba
story, where automating the procurement of operating
resources is considered a pull from the customer side,
aggregating orders and so on. Calico is automating the
push side of selling, where marketing knowledge and
complex product content are delivered to the customer as
they make contact with the Web commerce site. In this
way the customer gains comfort in purchasing on line
because the Calico technology assures that the consumer
feels the interaction is genuine and targeted to them
specifically. The right product, in the right configuration,
is driven by educating the customer about features and
options particular to their purchasing experience.
The best example of this is ordering a computer on-line
from Dell or Gateway. The complexity of possible
hardware and software configurations, including:
processor, memory, storage, video card, network card,
monitor type and size, and software packages leaves room
for hardware, software and budget conflicts. Calico's
technology guides the purchaser through the myriad
decisions in that process and allows “what if” analyses for
technical conflicts, part availability/lead times and budget
constraints. Through the process, Calico's marketing
database can provide detailed component information and
educate the customer.
We are seeing Calico's solution being extended well
beyond configuring complex electronics and consumer
durables to financial products (such as insurance or
financial instruments), telecommunications service
offerings, any product that involves a lot of choices and
requires that the buyer be educated during the purchasing
process. We believe a significant market exists for this
“high-touch e-commerce” and Calico is well positioned to
deliver this solution.
Calico was founded in 1994 and is based in San Jose,
California. The company currently employs 272
employees. The company's customer list is impressive
and includes Best Buy, Cisco, Dell, Gateway, Motorola,
Qwest, Siemens, and US West.
In our opinion, the Calico management team is very
capable. Alan Naumann, President and CEO, was General
Manager at Cadence; COO Dave Barrett was VP
Worldwide Sales at Rational; CFO Art Knapp was CFO at
Boole& Babbage for 8 years; and Matt DiMaria, Director
of Marketing, was VP of Americas Marketing for
Symantec.
E-Sales Product Line
Calico provides a software suite that delivers what we have
coined “high-touch e-commerce”. The product suite is
completely Java and XML-based and works with all
industry-standard browsers and major ERP and CRM
systems at the point of sale, including Oracle and SAP.
The purely net-based standards architecture of Calico
allows companies to interact directly with customers over
the Internet, intranets, extranets and corporate networks
and can be accessed through desktops, mobile computers
and information appliances and kiosks.
Calico e-Sales suite includes:
Configurator—An expert system that matches customer
requirements with product attributes, guiding customers to
products and services which best meet their needs. The
configurator uses user-guided behavior technology to join
constraints, product content and user interface information.
The configurator can do composite modelling, which
means that the product or serveice configuration can
accommodate numerous sites.
Loyalty builder—Is the second component of the e-sales
suite. Loyalty builder provides profiling technology to
personalize content and notify customers when
information has changed related to their order, new
products or features and so on.
Quote—Automates customized sales quotes and either
stores them for later reference or enters them into order
entry systems. XML capabilities allow these quotes to be
entered into supplier or partners order entry systems
InfoGuide—Provides targeted marketing information such
as brochures, datasheets, product reviews directly to
customers during the pruchasing process.
Calico Commerce, Inc. – 1 November 1999
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In addition a full set of tools support the building of the
configuration models which drive the e-sales suite.
Sales and Marketing Strategy
Calico has been proactive in building out a significant
direct sales presence on a global basis. The company
currently has 78 sales and marketing headcount distributed
between the headquarters in San Jose, and regional sales
and service offices in Atlanta, Boston, Chicago, England,
Germany and Sweden.
After the customer has been qualified and moves into the
sales pipeline, Calico often develops a pilot or custom
demonstration that can subsequently be used to design a
model for a full scale implementation. Direct sales efforts
are typically directed towards CEO and CIO-level
interaction as well as the vice presidents of sales and
marketing at potential customer sites.
In addition to its direct selling efforts, Calico has formed
marketing and distribution alliances with electronic
commerce software vendors including Silknet Software, a
provider of Internet-based customer support solutions, and
Netcentives, a provider of Internet loyalty, direct
marketing and promotion products and services designed
to drive electronic commerce. The company has also
recently entered into a joint marketing agreement with
Vignette to share sales and marketing leads, provide
complementary training of each other's sales teams and
develop joint marketing materials.
An important alliance of note is Andersen Consulting,
which integrates the Calico solution in exchange for being
promoted as the preferred Calico integrator. Andersen
holds an equity stake in Calico.
Competition
At this early stage of development in the e-commerce
customer-profiling and customer-leading markets, Calico's
primary competition currently comes from companies
developing an in-house e-commerce solution and an
increasing number of emerging and established companies
focused on electronic commerce. Over the next 18 months,
we believe Calico could see competition from a range of
companies including BroadVision, Siebel Systems, Oracle,
Trilogy, pcOrder.com, Selectica and FirePond.
We believe Calico's eSales solution suite competes well
with these technologies on the basis of the completeness of
the eSales suite from order configuration, catalog content
management, quoting through to affinity building
applications. Uniform Java- and XML-based platform
technologies allow customer to rapidly integrate the Calico
solution with a customer's existing Web and legacy
infrastructure.
Recent Financial Results
Calico reported FY 1999 (March) revenues of $21.4
million (+81%) and a net operating loss of $10.8 million or
$0.52 per share. The company recently reported 2Q 2000
(September) revenues of $8.2 million (+55%) and a net
operating loss of $5.9 million, or $0.23 per share. License
revenues grew 32% to $3.5 million while services
revenues grew 78% to $4.7 million. The license/service
mix for the quarter was 43%/57%. Gross margin was
54.6% and operating loss was $5.9 million, excluding non-cash
charges.
On the balance sheet, the post-offering cash position stood
at $80.7 million, accounts receivable DSOs were 85, down
4 days from 1Q 2000 and deferred revenues dropped from
$5.7 million to $4.9 million sequentially.
Outlook
We expect that, like other e-commerce software providers,
CLIC will be driven in the near-term by upside revenue
surprises and significant new customer wins and
partnerships. We are forecasting fiscal 2000 revenues of
$33.2 million (+55%) and fiscal 2001 revenues of $48.8
million (+47%).
"old report" 11/1/1999 |
