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Technology Stocks : PSFT - A new high. Should we expect more?
PSFT 0.00010000.0%Oct 29 5:00 PM EST
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To: Ken Merwin who wrote (397)6/6/1997 9:13:00 AM
From: Tom Smith   of 419
 
Ken,

Here is a link to that press release: biz.yahoo.com

This is an excellent move for PSFT. I worked in the Federal financial systems market from 1986 to 1993. The functional requirements for the federal market are applicable to virtually all governmental and non-profit organizations (universities, school districts, state & local governments, etc.) The governmental market is large and ripe, given the Y2K issues and the natural of their current systems. American Management Systems (aka AMS; my old company) has the de facto standard financial package in place at many federal agencies, but PSFT can blow it away functionally and technically.

As I see it, PSFT has two main issues here:

1) How will they price the federal applications? Federal agencies are notorious penny-pinchers when it comes to signing new software licenses, although once you are in an agency you can count on at least a decade of steady revenue. AMS's strategy, which worked very well for them, was to price applications very low, staff the projects with junior consultants, and make money on the consulting fees. The license fees here will not match PSFT's traditional commercial fees.

2) How will Oracle respond? PSFT and ORCL will now go head-to-head in this market. SAP and Baan are not contenders here. AMS is now out-classed and will lose market share. We should watch for press releases over the next year on big federal agency contracts to see if either company is pulling away.

Tom
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