I also listened to the conference call...
Fifty lines were reserved for the call and all 50 were taken. Vendors, shareholders, and stock brokers/(analysts?) were among those listening in.
Osterwise spoke for a while, then the Q&A began. I am impressed with Larry O. I recall Mulshine wrote somewhere that this executive is the best they could have hoped for, and after listening to Osterwise today, I believe that may be a pretty accurate statement. He struck me as a person with very strong leadership ability. He seems very dedicated, committed and focused, and I don't write those words lightly. He struck me as a person whose brain is working all the time on how to move Scangraphics into the future. And move it he will. That's the impression I get. I think we are very fortunate to have him leading the charge.
One thing I am surprised about, is that Osterwise is gung-ho about selling scanners - and I do mean gung-ho! This is a big change from what I had learned at last year's shareholders meeting. Back then, only marginal increases in scanner sales were predicted. Trolio wasn't too excited about this part of the company - his passion was with the new enterprises (Sedona & TRC). Now, the outlook has changed, new markets have been identified, and Osterwise is excited about the potential. Previously, sales efforts were focused on utilities, defense and mapping needs. Now, they are going after:
* color reprographics
* archiving
* newspaper pre-press
* and the sale of scanner-related software such as:
- Scanview - which L.O. believes the government has a large need for.
- vectorizing software
- color matching software.
He says the company is exhibiting at a newspaper industry expo within the next month. He calls the $1 million scanner backlog "the tip of the iceberg." The potential with the color reprographics market he says is huge. Archiving is also a significant business opportunity. It sounds like this part of the company is going to heat up!
The TRC now has 4 employees. A number of strategic alliances have been made, including with the Department of Commerce, a private training center, and a sales consulting firm. The TRC has two main areas of focus:
* Imaging systems - and everything associated with them (training, integration, etc). and
* Bid Set/Technical Data opportunities.
The Bid Set opportunity sounds very exciting. Osterwise said there are a million solicitations that the Department of Defense churns out in a year, with an average of 5 bid set requests for each solicitation. Scangraphics expects to generate a net profit of $10 to $20 for each bid set they sell through their new online bid set service. This service will start-up in the fourth quarter. Next, the TRC will attempt to provide the same kind of service for other government agencies and large corporations. They will search globally for more business opportunities like this. The potential appears very promising.
Sedona now has 25 employees and they have hired numerous consultants. There is something called "War Sim 2000." I missed some of the details with this - something to do with the military... Anyway, Sedona demonstrated their DM Tool version 5.0.2 recently at a gathering in Orlando, and apparently, it was quite a hit. What's at stake is 3000 seats and millions in consulting. DM Tool retails for $15,000 per seat. It is expected a large per seat reduction for the order will be negotiated. When it will happen? I missed that part - somewhere between 97-99.
It was mentioned that the company has an alliance with Bentley. And that a Windows NT version of Sedona SRV+ will become available this summer.
Mapping distribution and sales are another area of focus for Sedona. From what I heard, the company has one state mapped out totaling 1000 "quads." The quads will sell for between $1000 to $1400 per quad, and they expect to sell 500 quads this year (I think that's what he said). Buyers will be Dept of Transportation and others. Sounds very profitable. They invest a certain amount to compile the data, then they can repeatedly sell it.
Oracle was discussed during the Q&A part of the session. Sedona is working on software for their Spatial Data Option. I lost some of the details about this too, but I do recall Osterwise saying that it is possible Sedona may become a major component supplier for this. L.O. mentioned they have a highly regarded programmer who is java-tizing the software right now.
There are 15.7 million shares outstanding now. Warrants and options will add 11.6 million shares along with $31 million for the company. Osterwise was asked if this was going to be it with the equity financing. He said he couldn't say no for sure. The money should last for another year without much of a problem. That is, if the share price goes up. He is open to acquiring new technologies or companies, if the right opportunity comes along.
The 1998 eps projections I'd say are quite a guess. They have so many initiatives underway it seems they could easily surpass the forecasts. In my opinion, investors who are attracted to a company like this should just buy it and sit on it. Don't fret about the day to day fluctuations.
Think long term.
Ed Ryder |
