AREM--here is the profile from IBD
<<Cyprus is no high-tech mecca. But Lycourgos Kyprianoucq, chairman and chief executive of AremisSoft Corp., is proving that sometimes it pays to go where few have gone before.
Since 1978, when Kyprianou quietly formed the first software company on his native Greek island, he has made money by helping clients in underserved areas.
While he continues to line up business in emerging markets such as Morocco, Egypt and Lebanon, Kyprianou's also looking to an entirely different and somewhat more stable market: the U.S.
Kyprianou started his westward push in the mid-1990s. After picking up 10 small U.K. companies at bargain-basement prices - for a total $24 million - and another in New Jersey, he moved his headquarters to Woking, England. Now Kyprianou's decided to push AremisSoft westward in a big way.
Using a chunk of the $17.5 million raised from a public offering in April, AremisSoft plans to go on a shopping spree for mid-size U.S. software companies. The company wants 50% of sales to come from the U.S.
Reverse Strategy
"We're doing the reverse of the normal," said Kyprianou, referring to the common practice of going after emerging markets only after developing a solid footing in the U.S.
AremisSoft's enterprise application products help companies manage back-office operations such as accounting, payroll, purchasing, and some front-end functions such as customer service and sales.
The company makes and sells four software suites for four sectors: manufacturing, hospitality, health care and construction. In the U.S., the company plans to focus on manufacturing and hospitality.
No one believes the campaign will be easy. The software applications business is huge and fragmented. Competition is intense and includes such companies as PeopleSoft Inc., Oracle Corp. and SAP AG.
Still, AremisSoft has more than 5,000 clients, including Nabisco Biscuits Co., Telefon AB, LM Ericsson, Forte Ltd. and Bass PLC.
AremisSoft is not the only software company to see potential in underserved markets, such as Eastern Europe.
Company's Advantage
But company executives say they have an advantage.
"We understand emerging markets more than most companies, because we emerged out of an emerging market," said company president Roys Poyiadjis, also a Cyprus native.
Analysts agree.
"(Other companies) don't work it as hard," said analyst Paul Bloom of Cruttenden Roth Inc. "Are they going to send their best people to Bulgaria? The answer is, no."
But what about the company's know-how in developed countries? Kyprianou and Poyiadjis are graduates of Britain's Cambridge University. Kyprianou holds a Ph.D. in computer science.
Kyprianou's plan for the U.S. market has a familiar ring: Buy companies cheaply and cut costs by shifting research and development offshore to India. Phase in its own open-ended Aremis architecture. Plow back any cost savings into sales and marketing.
Kyprianou applied that method to his U.K. and U.S. acquisitions, made from 1993 to 1996. They now account for about 52% of company revenue, which analysts say will reach $72.8 million this year.
Seeks Larger Buys
Kyprianou believes it will be easier to take over and consolidate companies with $20 million to $30 million in sales than companies costing $300,000 to $7 million, such as the 10 U.K. companies he bought.
"Our model worked in the worst possible conditions - small companies with family cultures and no critical mass," he said.
The key to Kyprianou's strategy lies in India, where AremisSoft employs 186 software engineers and programmers.
Software companies such as AremisSoft live and die by new product offerings, because they must keep up with the operating environments of its customers. So research and development budgets are unusually high.
By shifting most of its research work to India - full of high talent at low wages - AremisSoft can trim those expenses in half, Poyiadjis says. Whereas other companies typically spend 15% to 20% of their revenue on research, AremisSoft spends only about 7%, he says.
Business Still Hot
While Poyiadjis works on landing American acquisitions from New York, business in Eastern Europe is perking under Kyprianou. AremisSoft recently secured a $9.2 million contract with a Bulgarian computer firm. In October, Info-Quest, the second- largest information technology company in Greece, bought a 20% stake in AremisSoft and will market its products in Greece and other Eastern European countries.
"AremisSoft's strategy is not to be the king of Bulgaria, per se, but to be king in 20 or 30 emerging-market countries," said Bloom. "They have the processes figured out."
After spilling red ink during the mid-1990s, when it was buying new companies in the U.K., the company is now squarely in the black. A cost-cutting program undertaken in late 1997 and early 1998 helped.
This fiscal year, earnings have steadily shot up, especially in the third quarter ending Sept. 30. Earnings that quarter rose 77% to 23 cents a share vs. 13 cents for the year-ago quarter. Revenue of $20.3 million was up 46.2% from the $13.9 million in the same quarter the year before.
First Call estimates earnings for the company, which trades as AREM around 24, at 80 cents this year and $1.02 for 2000. Fourth-quarter earnings are expected to rise to 28 cents from the third quarter's 23 cents.>>
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