bernie: their emphasis on the larger accounts and products is starting to effect their growth in customers
New customers per quarter have been consistently 22-28, except for the 4Q 1999 when they were 18 (but revenue grew 51% in that quarter). 1Q 2000 was 35 but this included 10 which came with the KD1 acquisition.
Certainly, an average price of $340,000+ in 2Q 2000 should be harder to sell than $100,000 in 2Q 1999. Put it another way, NETP does not need to sell as many to keep revenues growing. But the CEO has said that he expects to almost double the sales force by Christmas.
The CEO commented that the average sales price includes indirect sales and re-sales to existing customers. (But does not include sales through OEM's like VIGN and Xchange). Re-sales and indirect tend to have less of a consulting component to them and for this reason can be expected to bring the average down. The fact that the average is rising is a good thing. Also note that the margin is rising because of economies of scale and because indirect sales cost NETP less than direct sales. Indirect sales are rising as a proportion.
If the higher average price squeezes out many of the smaller companies who cannot afford the $340,000+, a new entrance for them has just been opened with the 4 ASP products. The cost is only $10-20,000 per product and a monthly fee of $5,000. It's true that these products do not scale, but that is fine for a smaller company. As the customer grows in strength and size of operations (with NETP's help) it can then graduate to the full enterprise solution at $340,000. The ASP will also be good for hooking larger, multi-channel companies who want to get going quickly and having tasted the product will then want to upgrade.
Theoretically, the ASP will allow the NETP direct sales force to continue to concentrate on the big accounts (whose numbers can grow as quickly as they did before as NETP doubles its sales force by the end of the year). I assume that NETP will start putting ASP customers on its customer count/list - but I think they should distinguish between the two.
A customer who buys 4 ASP products, pays as much as $80,000 plus some consulting for the initial installations and $20,000 per month for 12 months. The first year would cost such a customer a total of $320,000+ This is what the CEO referred to as "annuity" income - renewable income which is also very visible so that analysts and the market can get a better grasp of this aspect of NETP future earnings. |
