Hello All;
Many thanks for your questions and interest. I have endeavored to address each question within appropriate disclosure guidelines. Some restrictions do apply on certain topics, and there were some questions on the board that I cannot answer. Also, I have consolidated answers to questions with a similar theme.
I would like to preface the posting of my answers with a disclaimer that applies to all of the posted answers.
The matters discussed in the following posting by me, George T. Jimenez, contain forward-looking statements regarding ACE*COMM within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve risks and uncertainties. All statements other than the statements of historical information provided in the postings may be deemed to be forward-looking statements, which involve uncertainties. These risks and uncertainties could cause actual results to differ materially from those reflected in the forward-looking statements, and include, but are not limited to, the risks discussed in ACE*COMM's 2000 Annual Report on Form 10-K filed with the SEC for the year ended June 30, 2000, and the risks discussed in the Company's other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect analysis, judgement, belief or expectation only as of today's date. I, George T. Jimenez, and ACE*COMM, undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of posting.
Thanks to all who participated.
Let's get started!
George T. Jimenez,
Chairman & CEO
Question #1:
ACE*COMM has recently revised its marketing strategy to pursue a more global market. Could you comment on why management had turned away from its global market strategy earlier and now sees a return to it as a profitable course. Specifically, what markets are you pursuing? Is the Asian market still a viable option? How are the Central & South American markets looking?
(By: aceinvest, 02/15/01, 01:00 pm EST, Msg:6550 of 6617)
aceinvest;
Excellent questions. Let me outline our strategies and rationale.
In fiscal year ‘98 and in this current fiscal year, we were heavily engaged in markets that experienced a downturn. Asia in ‘98 and the U.S. new carrier segment in ‘01. Asia was affected by an economic collapse and currency devaluation, and the U.S. is being affected by an over-abundance of network infrastructure build-out ahead of consumer demand. We have had to respond in each instance to market conditions and adjust our business operations accordingly.
It should be noted that today the outlook for Operations Support Systems (OSS) and Business Support Systems (BSS) is healthy worldwide, fueled by many factors including the development of new infrastructures in developing countries. All regions of the world are expected to experience growth in OSS/BSS sales, however the highest growth rates are currently taking place outside North America. According to reports we’ve read, the Asia Pacific and Latin American regions are now the fastest growing markets with annual rates of over 15% and 14%, respectively.
North America:
To offset the effects of a softer North American service provider market, we have implemented a plan that targets the growing segments of this market – first, those stronger players who we believe will likely be consolidators during this period, and for whom our Convergent Mediation technology will prove vital in getting value from their acquisitions. Second, we are addressing the needs and budgets of smaller players by offering software through our strategic partners who offer outsourcing services as an alternative to capital spending.
Asia:
These telecommunications markets are coming back, as the various regional economies are recovering. This is particularly true in South East Asia, which was hit hard some years ago. In this market, we have a strategic advantage that includes a large installed base, some very strong reference customers, and the experience of doing business in these regions.
Europe/Middle East:
We are pursuing a partner strategy in Europe, building on a model established with partners such as Siemens, TRW Inc., and local systems integrators. Mirroring our efforts in Asia, we will also build on our installed customer base to grow our business.
Latin America:
We continue to do direct business in Mexico, the Dominican Republic, and Guatemala. We are also building on existing partner relationships with international companies that have a strong presence in the area, such as Nextel and NEC for the South American market. Additionally, we are beginning to identify prospects for Convergent Mediation solutions among traditional carriers that are building new infrastructures.
GTJ
Question #2:
Could you briefly describe for me ACE*COMM's strategic plan going forward to continue to grow the company and enhance shareholder value? Lastly, could you give me some flavor of things to come for the future of ACE*COMM?
(By: dc97531, 02/15/01, 01:37 pm EST, Msg: 6551 of 6617)
dc97531;
To re-cap and expand on the previous query - we have implemented a strategy intended to accelerate both growth and profitability. Simply stated, we will:
Intensify our international presence by building on our alliance channel relationships, creating new partnerships, and positioning ourselves to capture direct sales opportunities with current and new customers.
Continue to pursue the strongest service provider players in North America with our industry class Convergent Mediation technology.
Pursue relationships that enable us to offer our software products to smaller providers in the U.S. as part of bundled services packages.
ACE*COMM is staying at the forefront of evolving technologies by working with a number of key industry players and by participating in the collective efforts of influential industry associations and forums, and the markets they support - important organizations such as the IPDR.org, the SoftSwitch Consortium, the WAP Forum and the GSM Association. Recently we unveiled the industry’s first “Session Initiation Protocol (SIP)-to-OSS” solution at the Carrier IP Forum in Miami, Florida, with dynamicsoft Inc. – the leading provider of carrier-class infrastructure software for packet-based wireline and wireless communications networks.
According to analysts, long-distance, local, and wireless telecom services will continue to be dominant revenue sources for services providers well into 2010, while Internet service adds a new dimension and explosive new growth opportunities. Many service providers believe the “enhanced services” industry has just arrived. Enhanced services will encompass new integrated voice, video, and data applications that have not yet been defined. Our solutions are tailored to each customer's needs, providing the analytical tools to extract knowledge from their networks--knowledge they use to reduce costs, accelerate time-to-market for new products and services, generate new sources of revenue, and push forward with these next-generation initiatives.
GTJ
Question #3:
Could you please describe the reason why it's so difficult in your business to project revenues from quarter to quarter?
(By: dc97531, 02/15/01, 01:37 pm EST, Msg: 6551 of 6617)
dc97531;
Our quarterly operating activity can vary significantly depending on size of the deals, when customers sign contracts or place orders for products and when we complete and deliver significant product orders. It typically takes a long time to sign up a customer for a large contract or order and, accordingly, it is difficult to predict the timing of such a contract or order. Certain orders are for products that require additional tailoring to customer specifications and can, therefore, result in varying delivery times. Our revenues also vary based on the type and quantity of products shipped, the timing of product shipments, and the relative revenue mix in a given period. Leaving aside the impact of other uncertainties associated with any business, such as changes in general economic conditions, the combination of the factors described above makes it difficult to project revenues in a meaningful way on a quarter to quarter basis.
GTJ
Question #4:
Can we expect reduced administrative expenses in the future?
(By: dc97531, 02/15/01, 01:37 pm EST, Msg: 6551 of 6617)
dc97531;
Please note that we combine our Selling, General & Administrative (SG&A) expenses. We expect our sales expenses to increase to support the growth strategies discussed earlier, and we expect that our G&A expenses will decrease as a result of our recent cost-cutting initiatives. We are working on further managing our expenses and we expect this to impact future quarters.
GTJ
Question #5:
Has ACE*COMM ever thought about a stock buyback program or issuing more shares to grow the business?
(By: dc97531, 02/15/01, 01:37 pm EST, Msg: 6551 of 6617)
dc97531:
For the past two years we have sought to build a cash position that will enable us to weather economic downturns and to focus on liquidity. A stock buy-back program would not be consistent with that strategy. In terms of issuing more shares, we would consider among others this option for raising capital when the share value more readily represents the company value and to the extent funds are needed.
GTJ
Question #6:
Could you please provide for me the difference between what ACE*COMM is experiencing in today's slowdown versus what happened in the ASIA crisis? How is ACE COMM better prepared and is this slowdown anywhere near what ACE COMM experienced in 1998?
(By: dc97531, 02/15/01, 01:37 pm EST, Msg: 6551 of 6617)
dc97531:
As discussed in my answer above, in both FY’98 and today, we were heavily invested in markets that experienced a downturn. We believe that we are better prepared for today’s conditions for the following reasons:
During the period following the 1998 downturn, we focussed on technology development and produced our N*VISION product. N*VISION has now achieved a leading position in its market segment and is responsible for a significant part of our revenue today.
We are operating from a much larger installed-base of customers (over 3000 in 65 countries).
We have built a greater network of partners and alliances to support our growth objectives.
Additionally, we were further ahead of this downturn in terms of preserving cash, and we implemented cash management strategies to address liquidity. We also now have banking relationships that are better suited to the requirements of a technology enterprise, and we reacted more quickly and strategically to reduce expenses in response to the downturn.
GTJ
Question #7:
Is it true that Cisco will not announce its relationship with ACEC because they are developing their own mediation product for their softswitch product line, thus saving the licensing fees and cutting ACEC out of the picture?
(By: matakovich, 02/15/01, 01:43 pm EST, Msg: 6552 of 6617)
matakovich:
The Cisco relationship with ACE*COMM was announced in press releases issued on 07/06/00 by ACE*COMM and on 06/06/00 by Cisco. Cisco continues to order enhancements to our software platform. The product of our work with Cisco is a Billing and Mediation System (BAMS) for the Virtual Switch Controller, VSC 3000. Version 1 BAMS completed development last fall and was successfully field-trialed at Pathnet, a U.S. Next-Gen Network Service Provider. The product is currently available for order in the Cisco on-line catalog. Version 3 BAMS was recently delivered, so some tuning is still going on. We hope that the product offering will be well received by the market.
GTJ
Question #8:
The January conference call mentioned a top salesperson who was very upbeat regarding potential orders. Is this still the situation and, if so, when will they be finalized?
(By: smc_cfo, 02/15/01, 04:36 pm EST, Msg: 6555 of 6617)
smc_cfo;
Our sales people continue to be optimistic as a result of continuing growth in the Company’s sales pipeline. We announced earlier our decision to focus our most senior management resources on worldwide sales. This heightened focus on sales by our most experienced people is already resulting in renewed momentum.
Our value-proposition message to our customers of “maximize revenues/minimize costs” is finding a receptive audience, and was underscored recently by a TelecomIT.com feature article on data warehousing. To quote an excerpt:
One company that saw an immediate benefit to data warehousing was Network Plus, a Quincy, Mass.-based telecommunications company. Joe Larizza, CIO and senior vice president, said implementing data-warehouse software obtained from ACE*COMM in July has netted the company an additional $250,000 monthly. "Previously, we were unable to capture CABS billing," he explained. "That alone has helped us recoup the cost of implementing the system."
Additional revenue capture was the short-term goal of implementing a data warehouse, Larizza said. Another benefit is standardized records for billing purposes. And ultimately, the company plans to use the system for marketing purposes. "Our long-range goal is to analyze the records of customers, look at their call patterns and upscale them to better calling plans that better suit their needs," he said.
(Source: TelecomIT.com, 01/12/00)
GTJ
Question #9:
Are the eleven customers who represent 85% of your business more optimistic now that the fed has lower rates twice and will probably continue to reduce rates in March? Are the capital markets beginning to open up?
(By: smc_cfo, 02/15/01, 04:36 pm EST, Msg: 6555 of 6617)
smc_cfo:
I am sure that lower rates will affect everyone’s perceptions, but we are not in a good position to assess our customer’s levels of optimism or pessimism as a result of federal actions. We believe that the capital markets are still being much more selective in terms of meeting service providers capital acquisition needs.
GTJ
Question #10:
I am not impressed by the Jessup group. Historically, in my opinion, they seem slow to respond to changing conditions. As an example, during the stock run up last February and March, they maintained a $12 twelve month target until the price was $15 and only then did they increase it to $20. Are you attempting to gain coverage from another firm?
(By: smc_cfo, 02/15/01, 04:36 pm EST, Msg: 6555 of 6617)
george--i asked you several times in the past about efforts to generate some research coverage from wall street--is there any hope for some coverage in the future?
(By: dtenwick, 02/15/01, 09:18 pm EST, Msg: 6559 of 6617))
smc_cfo & dtenwick;
We are appreciative of the longstanding support and services afforded to ACE*COMM by Jessup & Lamont. Of course, we always would prefer to have more rather than fewer analysts covering the company. We regularly hear from and maintain excellent relationships with several analysts who follow our sector. If we continue to improve our performance, we believe that we will experience corresponding rises in market presence and capital value. I believe that if we build it, the analysts will come.
In addition to our efforts to increase coverage, we are also implementing a more active campaign to keep current and potential investors informed about ACE*COMM – that is what prompted us to talk to you today.
GTJ
Question #11:
Analysts are talking about some consolidation in the telecom sector. With major companies like Lucent, ATT, etc. having major difficulties, are there more or less opportunities for you to partner with them. Shouldn't there be some economies that they can realize by using products already developed by Ace? (By: smc_cfo, 02/15/01, 04:36 pm EST, Msg: 6555 of 6617)
smc_cfo:
Fluctuations in our market sector present a variety of opportunities for companies like us. As always, we are actively reviewing and pursuing the most interesting possibilities.
Our technology does indeed offer these providers the ability to help maximize revenues while minimizing costs. Our Convergent Mediation brings together diverse and varied network technologies to capture, secure, validate, correlate, augment, and distribute data from any network to any userin real time. From across all conventional and next generation network elements service providers get a consistent view of data, real-time processing and reporting, and flexible and scalable distributed architecture. The N*VISION data warehousing platform uses extensive traffic analysis tools for network planning, service level measurement, financial performance and customer-specific marketing. It provides the knowledge these providers need to make cost-reducing and revenue-generating decisions today.
GTJ
Question #12:
How is the morale now that there have been two reductions in staffing? Are you experiencing any flight of key personnel?
(By: smc_cfo, 02/15/01, 04:36 pm EST, Msg: 6555 of 6617)
smc_cfo;
Understandably, recent financial performance and cost-cutting measures have affected our personnel. Knowing that other companies in our sector - even some of the largest - are going through similar cutbacks is of little consolation. Management has gone to great lengths to surgically effect the necessary changes and to optimize the organization for the business at hand. Most of our people see this and, I believe, appreciate the care with which the organization was adjusted. Many of these same people understand the significance of our technology in the market and continue to be motivated by the challenges.
Our people are our most valuable resource and we believe our staff is strong and focussed for the work ahead. We are pleased to be able to report that we have not experienced any flight of key personnel, and that we are fortunate to enjoy a high staff retention rate.
GTJ
Question #13:
Is there a reason why ACE*COMM does not provide to investors and the public what their backlog is? (By: dc97531, 02/15/01, 04:47 pm EST, Msg: 6556 of 6617)
dc97531;
We provide to investors and the public our backlog numbers at year-end in our Form 10K, filed annually and available upon request from our Investor Relations contact.
GTJ
Question #14:
Are you still going forth with your purchase of the license of the Oracle Enterprise Management System? And if so, could you please describe the major functions of the system as it relates to your company and what benefits it will offer you in the long-term?
Thank you.
(By: iamtheman11us, 02/15/01, 07:56 pm EST, Msg: 6557 of 6617)
iamtheman11us;
We are currently reviewing the costs and benefits associated with implementing the Oracle Enterprise Management System to mirror our plans to go to a process-oriented management system with greater task automation throughout the firm. The three major functions of this system are as follows:
1. Task Automation
2. Project and Program Accounting and Billing
3. Enterprise-wide Integration
The implementation of this Enterprise Management System would be expected to provide significant planning and control benefits, and to provide management with even greater critical marketing, sales, and expense data.
GTJ
ACE*COMM, the ACE*COMM logo, and N*VISION are registered trademarks, and Convergent Mediation is a trademark of ACE*COMM Corporation. All other trademarks are the property of their respective owners. |
