2/1/01 [OPNCF] Australian tech stocks douse cash burn rates
By Sophie Hares
SYDNEY, Feb 1 (Reuters) - Australian technology firms have slashed staff and costs in a desperate attempt to douse their cash burn rates, but it may not be enough save those with poor business models, broker JP Morgan said on Thursday.
The gulf was widening between firms which have boosted their customer receipts and slowed burn rates, and those with barely enough cash to last another year, JP Morgan said in a report on December quarter cashflows.
"While this cost base management is a positive for the short term survival of the group as a whole, it only prolongs the underlying problem - many of these small Internet-related companies are far from having profitable business models," it said.
Twenty-eight of the 62 firms surveyed had only enough cash to cover less than a year if they continued to spend at current levels, according to their quarterly reports, the broker said.
The poor performance of these firms was casting a pall over the whole sector, making investors jittery about pouring capital into stronger tech firms, and the report predicted the ultimate decline of some tech stocks.
"This should be interpreted as a healthy long term occurrence because their current existence taints the group as a whole."
A further 23 firms surveyed had negative operating cashflows, but had a firmer grip on their costs.
Fourteen of those had enough cash to last up to two years while stand-out emitch Ltd could survive for decades at its current cash burn rate, according to the report.
Ecorp Ltd, with almost A$90 million cash in the bank, was in the strongest position of the 11 cashflow positive firms surveyed by JP Morgan, followed by Melbourne IT Ltd with A$25.4 million cash on its balance sheet.
Customer receipts showed a strong turnaround in the December quarter, with firms posting a 47.5 percent rise in receipts compared with an 18.6 percent drop in the previous quarter.
Telco software group Open Telecommunications bolstered its receipts by 222 percent, while ecorp's customer receipts were up around 90 percent for the quarter.
(c) Reuters Limited 2001
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