Calian makes its mark in business-to-employee sector
Due North
September 21, 2000 by Bob Beaty
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One of the greatest challenges for just about any company, especially a technology, Internet or other New Economy concern, is finding
skilled people to perform an ever-changing list of specialized tasks. Since going public in 1996, Calian Technology (CTY) has been
making some good coin by exploiting that niche.
Calian's IT services division provides personnel consulting, recruiting and e-training on an outsourcing basis. The division constitutes 60
percent of the company's overall sales, which totaled just under C$100 million for fiscal 1999. The company's System Integration division
supplies software and hardware primarily to the satellite communications sector. Unlike many computer consulting companies, which saw
a drop-off in business after their Y2K contracts dried up, Calian's growth has sped up over the last year. Calian accepted noY2K-related
assignments and instead chose to gain (and enhance) its IT services business.
Calian's competition is fragmented, as there are few companies that provide its type of business mix. CEO Shaun
McEwan told UpsideToday that he considers Calian heavily customer-relationship based. He said Calian's
strength was in improving the inward dynamics of Internet-based information management between a company and
its employees -- an area often referred to as "business-to-employee" or "b-to-e."
Analyst bullish on future
John McIlveen, technology analyst at Yorkton Securities in Toronto, rates Calian's stock as a "strong buy" with a
12- to 18-month price target of C$13.25 -- double its current price of C$6.60. His earnings per share estimate for
fiscal 2000 is C$0.51 cents and he forecasts C$0.65 and C$0.83 cents for fiscal 2001 and 2002, respectively.
That gives the company price-to-earnings ratios have 13 times for fiscal 2000 and 11 and eight times over the next
two fiscal years. McIlveen projects 2000 revenues of C$132 million, up 40 percent over fiscal 1999. The
company has net free cash of C$13 million and an order backlog of C$125 million.
Calian's shares fared pretty well in the March-April downdraft. Shares have fallen from about C$9 in early March
to just over C$6 on Wednesday.
Calian's largest single client is the Canadian federal government. It accounts for 30 percent to 35 percent of sales and provides the
company with no less than 60 different contracts. However, Calian's dependence on that one client is being reduced as it brings new
clients onboard.
Informix deal on the way
One deal that reduces its dependence on the government is an alliance announced in March with U.S. management software developer
Informix (IFMX) to set up a Center of Excellence, one of 25 development sites Informix is establishing worldwide to build Internet
software infrastructures for content management and e-commerce.
Informix is facing its own challenges lately. The company announced in early August a restructuring that will cause the company to take
about US$75 million in charges. Informix shares have plummeted from just under US$20 in March to US$4.62 at Wednesday's close.
And on Tuesday Informix warned that its third-quarter earnings would come in well below expectations. It expects an operating loss of 5
cents to 8 cents a share, compared with forecasts for a profit of 2 cents. In addition, chairman Robert Finocchio has resigned effective
Tuesday.
McIlveen does not see Informix's recent weakness as a problem for Calian because there's little chance that Informix would ever cancel
the deal.
Calian's McEwan defined his company's greatest challenge as solidifying its position in the business-to-employee sector. McEwan found it
interesting that heavyweights such as Larry Ellison of Oracle (ORCL) are just now realizing the potential of the sector and helping to
legitimize a model that Calian has already developed.
When the time comes for the IT services sector, Calian will likely benefit early in the move.
Bob Beaty worked in the investment industry for 20 years in Canada and the U.K. Since 1995, he has been writing and
producing content for some of the best financial sites on the Internet. He lives with his wife and three children on an island off
the coast of British Columbia. Disclaimer: He does not have a position in any of the stocks he writes about. |
