AH,
Below is a repost (#863) of "richjp"s (6/11/00) from Raging Bull ... it's the most interesting & recent ... truth -- who knows ?:
A few weeks ago I attended a major Internet trade show at Olympia and spent time on the Merant stand talking to various members of their staff.
I will make it clear that I bought in to Merant at about 160p about a year ago and clearly missed the opportunity of banking a substantial profit, however that's my fault - too greedy!
I used to work in IT sales for about 20 years, so I made sure the Merant people I spoke to were primarily technicians rather than just sales and marketing people. I wanted to get honest answers and not just the official company sales pitch, hence my reason for speaking mainly to the technicians.
The people I spoke to were all upbeat about the company's prospects. They said that the sales structure had been streamlined following the various acquisitions Merant had made. Lasy year as many as 3 Merant salesmen were calling on the same customer - that has now been changed so that the customer now only has to deal with one salesman - sounds obvious but the main thing is that Merant has listened to it's customers and put that right and it should also lead to a reduction in sales and marketing costs.
I was told that this would be an "exciting" year for Merant - and those comments I repeat were made by technicians. Their biggest problem was recruiting enough consultants although they believe they are successfully addresiing that. The fact that they are recruiting is clearly a good sign.
The area that Merant is targetting is far more complex than I believe many shareholders realise, but that is also why the business opportunity is so massive. The Egility product has to do more than make old mainframe systems Internet accessible. Very often these systems do not contain all the data needed to provide an internet service, therefore the challenge is is make the mainframe data available, marry it with additional data from newer systems (e.g. Microsoft), offer interactive services to the clients customers and then update other traditional order processing systems etc. If that sounds simple in theory, in practise it is very difficult.
I suggested that because of this complexity many clients would opt for pilot projects before making major commitments. I was told that this was the case and that Merant were involved with "lots" of pilot projects allthough pilot projects in themselves could typically bring revenues to Merant of œ200K to œ500K each - therefore customers were making serious evaluations of what they can do with the Internet. Merant were also able to provide customer references for systems actually in operation, in other words Merant's software actually works and is not just fanciful marketing - I can assure people that having worked in the industry that is not always the case.
Surprisingly to me I was told that Merant has no direct competitor. I was told that because of the way they attack niche markets they rarely go head to head for mega deals with big competitors like IBM or EDS. If those remarks are only partially true it suggets that Merant has a sound marketing strategy.
Now the bigger picture. Since tech stocks have fallen out of favour there has been much media discussion of whether or not technology and the internet have been overhyped. IMHO the hype is for real. Look in the Sunday Times recuitment section today and you will see ads on virtually every page for people with Internet skills. Look at the sums of money paid by companies for the next generation of mobile phone licences, the investments being made by companies like Cable and Wireless, the convergence of various technologies - interactive TV, WAP, broand band internet access etc. The evidence of what is happening is all around.
Some very successful business colleagues of mine in the software world often used the words "It always takes longer than you think" when developing new technology. That is my view on e-business etc. The various marketing predictions of the scale of some e- business opportunities is real - what is incorrect is the time scale. I read in the IT trade press only last week that only 3% of UK companies have an IT strategy - 3%! We are only at the beginning of the internet explosion. When ever I read any marketing forecast of the growth of a new market, I always add 2 years to the timescale and that usually is about right.
Now back to Merant. The company is forecasting just 10% growth for the next year. I have no problem with that growth - it ties in with the information I was given that Merant is involved with lots of pilot projects. Pilot projects I have been involved with often last as long as a year. As long as a reasonable proportion lead to full scale implications then revenue growth for Merant in two years time and beyond will be significant. I am also pleased that Merant is now setting moderate short term growth expectations - far better to do that and then over achieve.
Somebody else recently posted here that Merant will be worth a lot more in 2 years time than it is now. The current issue of Shares magazine shows a forward PE in 2 years time of just 10. Assuming Merant is successul that is way too low.
Sure Merant has made mistakes but I think it is time to focus on what has been achieved. The company has been completely restructured and refocussed. There are many software companies who would like to be in Merant's technical position in that respect. Only this week SAP for example were saying they were going have to get into the internet by acquisition.
It is the comapnies that have restructured now and taken the short term pain that will prosper in the medium to longer term. If Merant are reasonably successful I would suggest the share price trebling back to a minimum of 450P in 2 years. If of course the market starts to look at technology stocks favourably again and in a 2 year time frame I am sure it will, then we could see the price much higher still. This would of course mean it would be probably over valued again - so maybe next time I will take some profits!
Good luck to all us shareholders !
Michael |
