JOHN ROBERTS - RAZORFISH - (RAZF) CEO Interview -
published lad304 DOCUMENT # LAD304 twst.com
JOHN ROBERTS, Chief Financial Officer, is responsible for overseeing Razorfish’s global
financial operations. He comes to Razorfish through the Boston office of
PricewaterhouseCoopers (PWC), where he was a partner in the PwC technology practice and
the engagement partner for the Razorfish account. Mr. Roberts has spent the last 12 years with
PwC (formerly Coopers& Lybrand) working with companies in the technology practice. In addition
to Razorfish, major clients he has worked with include i-Cube, prior to its acquisition by
Razorfish, Tyco International, Waters Corporation and Dynatech Corporation. He is a CPA and
earned a Bachelor’s degree in Accounting from Boston College.
Sector: Application Software
TWST: Would you mind providing our readers with a brief overview of Razorfish?
Mr. Roberts: Razorfish leverages digital technologies to help companies invent and reinvent the
way they do business. Over five years ago, Jeff Dachis and Craig Kanarick, childhood friends, got
together to start Razorfish with a shared vision and passion for the digital revolution. They have
successfully and profitably grown the company to over 2,000 employees in 15 offices and in nine
countries around the world. We provide services to a broad range of Global 2000 companies,
across a variety of vertical markets. The primary vertical markets we serve are financial services,
telecommunications, information and communications, along with a handful of others.
TWST: What significant trends or developments do you see taking place in your sector
of the market? Would that be diversified services, or would that be just digital
solutions?
Mr. Roberts: For Razorfish, it’s the delivery of diversified services in the digital medium. Some of
the biggest trends that you are going to see in our marketplace over the next couple of years are
around a few areas. I think you’re going to see tremendous growth in wireless and broadband
areas. You are going to see convergence of wireless and broadband with the Internet. Everybody
is talking now about the mobile Internet, and the wireless Internet, this convergence and the
convergence of wireless and broadband are going to become a reality in the near future. Another
trend that you’ll see within the several companies in our specific space, the interactive
integrators, is consolidation. I think you are going to see a lot of M&A activity over the next
couple of years.
TWST: Do you expect to make any acquisitions and partnerships?
Mr. Roberts: Yes, absolutely. Razorfish has done, over the last couple of years, about 20
strategic acquisitions strengthening our service offering through a wide range of selected
companies. I think what you are going to see is more consolidation for the number of public
companies that are in this space right now.
TWST: Do you provide services to both brick-and-mortar and click-and-mortar
companies?
Mr. Roberts: We do, but click-and-mortar, or dot-coms, or VC-backed start-ups, have been
5%-10% of our business. Historically, it has been and is a relatively small portion of our
business.
TWST: What do you see as the greatest opportunity for Razorfish over the next couple
of years?
Mr. Roberts: Razorfish’s greatest opportunity is in the wireless and broadband areas where we
are extremely well positioned. If you look at the competitive landscape of actual delivered
wireless projects over the last two years, Razorfish is in front. Our experience gives us the
tangible advantage of experience that our clients are looking for. Mobility and broadband are an
exploding part of the market expanding on multiple platforms, network and devices. Mobility and
broadband complement the internet increasing depth, breadth and efficencies for the user. Given
our mobility and wireless experience, along with our strong international presence, particularly in
the Nordic countries that have an accelerated wireless acceptance, Sweden, Norway, Finland,
Denmark, we are well positioned to capture a lot of potential growth.
TWST: How would you differentiate Razorfish from the competition?
Mr. Roberts: One, the scale of our business is a differentiator. Now 2,000 people, and a quarterly
revenue rate of $76-$77 million, we have more scale than most of the others. Two, our
international footprint with 15 offices in nine countries is larger than many of our competitors.
Three, our early presence in the wireless and broadband areas gives us the advantage of the
experience of delivered projects. This experience is one reason why our existing and new clients
choose us. These factors combined, we believe, positions Razorfish well and with an advantage
for what the future growth opportunities are going to be out in 2001-2002 and beyond.
TWST: Do you consider yourselves to be the leader in your market? What are your
plans for further growth, in addition to acquisitions?
Mr. Roberts: I’d certainly say we’re one of the leaders. There are a handful of companies in this
space that folks regard as being the leaders, Razorfish is absolutely in there. When you combine
our services, our wireless and broadband expertise, the strength of our international presence,
with our long-term approach to client relationships, we are a leader. The caliber of our clients
makes us a leader. We approach our client base of Fortune 500 or Global 2000 clients with a
philosophy of building long-term relationships. We are not in this to do projects for clients: we’re
in this to build relationships with clients and really become their partner in helping them
transform their business. Razorfish wants to be our client’s business partner, not just their
consultant, in moving them into the new economy. Understanding their business, what is
important to their business, getting involved in their business, and being a critical part of helping
them transform their business.
TWST: Is your market in Europe growing right now?
Mr. Roberts: Longer-term it is growing. If you look back at the last couple of quarters, we’ve had
growth in Europe. We have had some short term challenges related to the seasonality in Europe
and the weakness of the Euro. We are taking the appropriate steps — implementing initiatives
and taking actions to deal with short term and long term challenges. If you look at our growth
rates in Europe over the last year to two years, and where we think the market’s going forward
out into 2001 in Europe, absolutely the market is growing there for us.
TWST: Which country, would you say, accounts for the highest revenue growth overall?
Mr. Roberts: The US is certainly very strong for us. Within Europe, we think there’s tremendous
market opportunity in the UK and in Germany. Yet Germany is a relatively small market for us
now in terms of the number of people, or the amount of work we have there, but we believe there
is tremendous opportunity and demand.
TWST: Did you mention that you have a presence in Asia?
Mr. Roberts: We just opened our office in Tokyo in July of this year. We knew we wanted to get
into the Asian market, and we seized this excellent opportunity by entering a 50-50 joint venture
with Sony. We are very excited about the opportunity that this venture is going to provide over the
next couple of years. It’s relatively new for us: we’ve only been in business there for a quarter and
a half or so.
TWST: What are the analysts’ projections with regard to the rate of gain in sales and
earnings over the next few quarters?
Mr. Roberts: If you look out to 2001, most of the analysts have us growing at anywhere from
35%-45%, top line and bottom line.
TWST: What would you say are the most significant challenges or risks that Razorfish
faces in the next couple of years?
Mr. Roberts: I’d say the most significant challenges are around project delivery and execution.
As we grow in scale, as we grow in terms of international presence and so forth, we have to
make sure that our number one objective is always client satisfaction, which comes from both
project delivery, and project execution. That’s the key for us. We must get these items done
right, and continue to focus on them as our top priorities.
TWST: Would you say that you hang onto a lot of your customers as well?
Mr. Roberts: Yes, we have a high client retention rate, with 70% of recurring work for existing
clients. We are interested in maintaining these long-term relationships with our clients.
TWST: You seem to have a relatively young management team. Are they experienced?
Mr. Roberts: Yes, we are. If you look at some of the depth of our management team, and where
we came from. Craig and Jeff founded the company five years ago. Jean-Philippe Maheu, our
COO, has been with the company for about three years now, but has management consulting
experience with A.T. Kearney and Gunn Partners. I come from PricewaterhouseCoopers, where I
was an Audit Partner. If you go to the level below that, you go to Managing Directors of offices,
you go to folks who are running key operating units for us. These people have come from places
like Andersen Consulting, McKinsey, the Big 5, who have a lot of deep management consulting
experience and background to help grow Razorfish’s business. I think we do have a deep team in
place.
TWST: Are there any opportunities for improvement?
Mr. Roberts: We want to improve some of our operating metrics. If you look at the utilization
percentage for us, that’s an area we want to improve some of our metrics there. We want to
improve our metrics around revenue per employee, and revenue per billable employee. That’s just
kind of on the metrics side. We’re always looking to improve our client relationships. One of the
things that we’ve spent a lot of time on internally over the last several quarters is in the training of
our people. We’ve spent a lot of time really focusing on making sure that we’ve got the right
management training for people, and giving them the exposure to different and new technologies,
techniques, processes, so that they can grow individually as this business grows as well. This is
a continual challenge in a business that grows at the rate that Razorfish’s business has grown.
So, is it something where we can improve? Definitely, it’s something we can improve. We’re
spending a lot of time focusing on it.
TWST: As CFO, where would you say that you spend most of your time with this
company?
Mr. Roberts: There are a few areas. I spend a lot of my time with our external security analysts
and investor community. And then I spend the rest of my time managing our financial
organization around the world — being in 15 offices and making sure that we have the right
finance infrastructure, controls and processes, and support systems to help drive the business
forward.
TWST: Do you have any thoughts or comments on your stock price?
Mr. Roberts: I believe our stock is undervalued right now. If you look at the pricing of our stock at
around $5 or so, based on the growth rates that we think are going to continue in this business, I
think that the market will recognize the value on our stock over a period of time. I think we’re in a
short-term period here where there’s a lot of uncertainty around the industry, a lot of uncertainty
around the companies in the industry, but over a period of time, I’m sure that the market will
reward the winners in this space. And we believe we’re well positioned to be a winner in this
space and capture the market demand and opportunity that is there. Am I satisfied with the
current market valuation? No. Do I think it’s fairly valued? No. Do I believe, over a period of time,
the market recognize those items? Yes, I do.
TWST: Why? Any particular reason?
Mr. Roberts: The sector is relatively new, first of all. You’ve had a lot of companies go public in
this sector in the last couple of years. There has been a lot of uncertainty around how to value
the companies in this space. Those couple of factors together lead to some volatile markets.
TWST: It’s still relatively new territory for a lot of people.
Mr. Roberts: Yes, it is. The volatility in the stock prices right now has not tracked the volatility
and the operations of the companies. So there’s something else going on in there.
TWST: Would you want to give potential long-term investors, two or three reasons for
investing in Razorfish?
Mr. Roberts: Yes. The key reasons to invest in Razorfish, are one, the strength in our ability to
scale, number two the strength of the Razorfish brand — which is a powerful asset. Number
three, our well positioned, global structure and presence. Currently, 15 offices, in nine countries,
which we will expand over time. Number four, our positioning in the wireless and broadband
areas, which again, I think, are areas that you are going to see tremendous growth over the next
couple of years. We have the experience, we have the delivered projects, we have the depth of
the skill sets in the employees here within Razorfish to be able to capture that market
opportunity.
TWST: Thank you. (JF)
JOHN ROBERTS
CFO
Razorfish, Inc.
32 Mercer Street
New York, NY 10013
(800) 950-4332
(212) 966-5960
(212) 966-6915 - FAX
www.razorfish.com
e-mail: info@razorfish.com |
