KBROS CC Report:
On Wednesday, February 28 at 12:00pm ET, StarBase held a conference call to discuss its new product strategies and guidance
associated with its recently completed acquisitions of wordweb.net and Technology Builders (TBI).
•StarBase has broadened its product offerings to include content management functionality from worldweb.net and requirements
management from TBI.
•A new product code-named ioFalconld, providing scalability to thousands of users, should be made generally available in the March-
April 2001 time frame.
•As a result of new forecast acquisition-related revenue, we are raising our revenue estimate for 4QFY01 (ending March 31, 2001) to
$16.5 million from our previous estimate of $10.8 million. This increases our FY01 revenue estimate to $41.5 million from $35.8
million. Our FY02 revenue estimate has increased as well to $90 million from $62 million.
•Our pro forma EPS estimate for 4QFY01 and FY01 remains unchanged at $0.01 and a loss of ($0.07), respectively. Our FY02 pro
forma EPS estimate has increased to $0.05 from $0.04. We anticipate the acquisitions will be slightly dilutive in 1HFY02 and accretive
in 2HFY02, with the net effect being accretive for the year.
•We are establishing new estimates for FY03 with $117 million in revenue and $0.12 pro forma EPS. These establish YoY growth rates
for revenue and EPS of 30% and 128%, respectively. We believe anticipated synergies associated with the acquisitions offer upside to
these estimates.
•We are reiterating our STRONG BUY rating and $20 price target.
On Wednesday™s conference call StarBase outlined a comprehensive strategy to broaden its end-to-end collaboration offerings. Key to the
strategy is incorporating content management and requirements management functionality from its recent acquisitions. StarBase™s
approach is to provide end-to-end support of code and content creation and management throughout the development life cycle. Along
with utilizing StarBase™s StarTeam product suite, the strategy enables customers to selectively retain third-party development products that
may already be in use or preferred. Using this approach, StarBase offers customers an open environment that should provide them certain
competitive advantages associated with flexibility, while still accomplishing an end-to-end solution.
NEW PRODUCTS BRINGING NEW REVENUE OPPORTUNITIES
Expressroom I/O and Caliber-RM
StarBase™s new content management product (Expressroom I/O from worldweb.net) opens a new addressable market with average sell
prices in the $100-150,000 price range. We believe StarBase will find extensive new revenue opportunities with customers seeking Java and
XML-based content management in a more affordable price range than competing offerings in the $250-500,000+ range.
A new enhanced version of Expressroom should become generally available in April 2001, and will likely add functionality including
integration with BEA Systems™ (BEAS $38 59/64) WebLogic product.
TBI brings to StarBase Caliber-RM, a requirements management software product. TBI has approximately 700 customers who have
purchased its Caliber product with an average sell price of approximately $25,000. As a result of the two acquisitions, StarBase™s customers
have increased from approximately 1,800 to over 2,500. We believe the majority of the customer base will be targets for cross-selling
products from the three merged companies.
StarTeam Web Edition
The StarTeam Web Edition product should be generally available by the end of this month. Web Edition provides adds a Web browser
interface to the StarTeam product. We believe this new capability is a high-demand offering that will produce immediate new incremental
revenue for StarBase upon its release.
Highly Scalable icFalconla
Within the next two months, StarBase should be making generally available its new highly scalable StarTeam product, which has been code-
named iaFalconla. The product, which has been running in beta environments for the last several months, provides scalability to 1000s of
users. We believe there are at least a few customers who will be ready to take advantage of this new technology upon release.
StarTeam J2EE Integration Product
The StarTeam J2EE integration product should become generally available this month. The product enables content that has been created
through StarTeam to be deployed to J2EE standard application servers such as BEA™s WebLogic and IBM™s (IBM $106.05) WebSphere.
Other J2EE applications servers to be supported include those from companies such as Art Technology Group (ARTG $28 5/16), Sun
MicroSystems (SUNW $20 1/16), and Hewlett-Packard/Bluestone (HWP $29).
Vignette and Remedy Integrations
A third party was contracted by StarBase to develop integrations between StarTeam and Vignette™s (VIGN $6 3/8) StoryServer and
Remedy™s (RMDY $25 7/16) customer relationship management product. The completed integrations were delivered to StarBase last
month. We believe these will exit Q&A and become generally available by April 2001.
Galaxy for Peer-to-Peer Collaboration
StarBase™s Galaxy product provides developers with instantaneous communications Œ similar to a iochat roomlt as opposed to traditional e-
mail functionality. We believe there will be strong receptivity to this product, which should become generally available later this month.
Allaire Spectra (Macromedia) Integration
Integration with Allaire™s (ALLR $8 3/4) (Macromedia) Spectra product should be made generally available by April 2001.
POSITIONED FOR GROWTH
We believe StarBase is well positioned to expand its business with 30 sales teams (of three people each) versus 12 teams prior to the
acquisitions. Additionally, the distributor channel is increasing from 21 to 30 distributors Πprimarily contributing to Europe and Asia
Pacific business. Potential synergies between the combined companies should provide upside opportunity to our new FY02 and FY03 estimates.
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