Thanks for your comments.
Regarding the reduction in sales and marketing staff by "100", I would suggest you read the last two 10Ks. VSNT had a direct sales force (including telesales)of 69 people at 12/31/97. This was reduced to 49 people as of 12/31/98. Not sure where you're getting "100", but in an organization of this size, I would hope they wouldn't have anywhere near the number you report to begin with. As a matter of fact, according to the latest 10Q, they will probably be adding to the sales/marketing function as business developes. They have also been spending additional dollars on R&D each year, $3.3, 5.2, and 7.7 million in 1996,1997 and 1998 respectively.
Regarding A/R growth: you are wise to always monitor this number in a company this size. The DSO number was discussed on the last conference call and 90-100 days is the target range for the Company. Software companies typically have higher DSOs due to the nature of the industry and where sales fall within the quarter. Again, always a number to watch, but not one I'm concerned with at this point.
Regarding Cowen and it being the original banker. If you know anything about Wall Street analysts, then you know that they are loath to get back in a stock after they have been burned. After riding this stock from the mid-twenties down to about $1.00, an analyst would distance him(her)self from the situation. Look at the comments/coverage from Cowen and you will see what happened. It is only recently that the analyst has "warmed" to the story a bit, and it is only recently that he floated a year 2000 earnings number. So don't kid yourself into thinking that there's some analyst out there looking for a few investment banking dollars. Keep in mind that the Cowen analyst also covers BEA Systems, so he is well aware of what's going on in the industry and what technology is being well received.
Regarding the VSNT balance sheet. Although it is not where everyone would like it to be, they have made "dramatic" improvement since this time last year. Yes, they used some converts to reduce debt along the way, but shareholder's equity has improved and should continue to improve along with cash flow. Shares outstanding and fully diluted are still very reasonable for a company this size and should help liquidity as the market cap grows. Cash flow is very important to a company this size -- and it has been improving. Although I like companies with strong balance sheets, I will not invest unless I see the possibility of strong revenue growth. If I am correct, next year we should see steady top line growth which should ameliorate some of your balance sheet concerns.
Regarding the IBM relationship. While I agree that this does not guarantee success, it is certainly a positive for a company this size. On the latest conference call, the Company discussed the France Telecom win as an example of this evolving relationship. Keep in mind this relationship is just getting started, so with a little bit of luck and hard work, we'll see more of these types of wins.
If you are truly short the stock, you will look at each issue as "the glass being half empty", I look at this situation as a small company with good technology that is turning the corner toward profitability. Therein lies the basis for stock market activity, and as some wise gentlemen once stated, in the short run the market is a voting machine, but in the long run it is a weighing machine. To wit, we'll see what happens next year.
By the way, keep your thoughts and comments coming as it forces us longs to stay on our toes! |
