Re: The Investors' conference call yesterday.
The announcement of Answers.com's signing of GE is tremendous news!
I was encouraged when Don Sandford talked about how their investment advisors have told them that it was quite normal for companies that operate in this space to trade at about 20 - 100 times their annual revenue per share. Taking Don's mid range revenue number of $15 million of revenue this year, and ~ 70 million shares, times 20 to 100 provides a ballpark figure of $5 - $25 per share. He also stated that the real question is how going into the rest of this year and into next year their revenue ramp will have an impact on how investors view their share price. He stated that he believes that there is good potential for Net Shepherd to do very well as they move forward.
I, and many others, would have liked to have heard him tell us what the dollar value of this contract means to Net Shepherd / Answers.com. Yet, as he mentioned he was not at liberty to provide this to us.
Granted, I fully understand and appreciate the position that he is in. I also believe him when he stated that by releasing these numbers, it could help Answers.com's competitors. I don't think it has anything to do with blowing smoke to confuse the issue. With access to this information, these competitors could easily come in and offer Answers.com's customers a "Sweetend Loss Leader" deal that would effectively kill any momentum that the company now has. So, even though my head understands it, my excitement was dulled. I also was disappointed that no rockets would be going off in the sky as we partied till dawn with the news.
Unless something has changed which I am not aware of, as the revenue from this master services agreement begins to ramps up I am confident that how Answers.com's business model works and how their payments to their distributed task force are structured, it will mean that when more work does comes into the company their costs will always be significantly below the revenue they will generate. That profitable model is counter to what many of the other Internet based companies have to work around. These other companies have to initially spend much more than they make to generate revenues. That is why so many of them are in financial trouble now. I have to assume that the bulk of Answers.com's GE related expenditures are now behind them.
GE is a company that has 340,000 employees with market capitalization of $520 Billion. They have a is a followed by 21 brokers - all of which have rated GE as a either a Moderate or a Strong buy. This is because they are very well managed, and they know what they need to do to make their companies work well, and service their customers. It has been stated many times that they are arguably the best run company in the world.
During the forum, Peter Hunt quoted a statement from GE where they stated that . . .
"For 2000, the company's e-Business strategic direction is three-fold: ensure that every GE business has a Customer Web Center offering the highest quality service, sales and support online; migrate internal procurement and supplier resources to the Web to take advantage of increased productivity and cost savings; and ongoing development of new technologies and services that will contribute to online sales growth."
I strongly urge all investors to think long and hard about why this massive, world leading company selected Answers.com to help them service their customers on-line!
Don Sandford also mentioned that Answers.com has been talking with 40 to 50 potential customers. This obviously is a healthy number, and it is encouraging. Plus, you have to believe that with the GE announcement, Answers.com has gained a much, much more credibility in these potential customers' eyes. With this enhanced credibility, it will put Answers.com into a much stronger bargaining position as well.
Now add to this a healthy percentage of the hundreds of companies from GE who will be now talking to Answers.com and we could have a real interesting time over the remainder of the year as the revenues ramp up. As Don Sandford stated, the ramp up time for Answers.com will need to service these companies will be considerably faster as they won't have to continually re-prove themselves to the GE family. They have already run GE's gauntlet and come out a winner.
One more thing, throw in any work that ktopia and ClickChoice has underway, and any other potential licensing arrangements that Net Shepherd will be doing directly with other customers and this company's outlook becomes all that more interesting.
With the AGM on July 13th, I fully expect to hear positive announcements on a number of fronts. After the GE announcement, I am encouraged, and I expect that the rest of this year will definitely be both very interesting and profitable.
Crazy Canuck |
