More Clients, Lower Costs Key Its Rebound
BY ADELIA CELLINI LINECKER
INVESTOR'S BUSINESS DAILY
Finding your way back from financial disaster is no easy task.
For MapInfo Corp., (MAPS) the road back to profitability after surviving the tech bust was long and hard.
"We learned to be patient," said Chief Executive Mark Cattini. "We knew it was going to take a couple of years to turn things around. It was just a question of not overreacting."
MapInfo develops, markets and supports location-based software and data products. Its flagship product, MapInfo Professional, analyzes location-based data such as ZIP codes, addresses, area codes and demographic information to give clients useful business intelligence.
The company's business steamed along in the late 1990s as it profited from the deregulation of the telecom industry. In 2002 as much as 40% of MapInfo's revenue came from telecom firms.
But industrywide reductions in information technology spending — especially in North America — dealt MapInfo a blow.
"We lost a big piece of our market virtually overnight," Cattini said.
The company lost money in fiscal 2002 and 2003 after operating in the black for much of the previous decade. Its stock price, which shot above 52 in January 2001, hit a low of 3.11 last March.
Cattini and his team had a two-pronged strategy to revive MapInfo: diversify the client list and cut costs.
To add new clients to the mix, MapInfo last year purchased Thompson Site Selection Research, a leader in retail market analytics. The buy brought aboard Home Depot Inc. (HD) as its largest single customer and helped MapInfo quadruple its predictive analysis business.
"The Thompson acquisition really threw a footprint in (the retail) area," said analyst Steve Gear of Westminster Securities Corp. "That's a fairly significant presence."
Thompson added $12.8 million in sales and helped change the revenue mix. Service sales grew to 23% of total sales from 19.1% before the buy. And the telecom segment of total revenue also declined.
In fiscal 2003, which ended in September, there were 44 nontelecom sales vs. 13 the year before, Gear says. At the same time, an economic rebound in North America fueled a new wave of IT spending.
MapInfo also focused on selling to government clients. It signed new contracts with the Defense Department, the Justice Department, the Los Angeles Police Department and the city of Camden, N.J.
CEO Cattini expects his firm to win some homeland security work as well, though that might not happen for awhile.
"Contracts and money are slow to be released," he said. "But we're well-positioned to gain from these contracts if and when they happen. We're in it for the long term because we have lots of expertise in the field."
Meanwhile, MapInfo has worked to improve its bottom line through a series of cost-cutting measures, most of which involve integrating the Thompson acquisition and reducing staff.
Around 180 workers were laid off. MapInfo also closed several field offices and in-sourced Web services. The restructuring reduced the company's expenses by $4.8 million annually and helped move it back to profitability.
MapInfo has run off three straight quarters of profit. It earned 4 cents a share during the fiscal first quarter ended in December, up from a 12-cent loss the prior year. Sales gained 37% to $28.6 million.
Analysts polled by First Call expect earnings for the full fiscal year to reach 30 cents a share, then almost double to 57 cents in fiscal 2005.
Unique Position
MapInfo is organized into three business units.
Its location-based intelligence unit gathers data that are useful in crime analysis, asset tracking and emergency response.
The predictive analytics unit provides data to predict customer behavior in a target market.
Location-based services provide mobile applications for subscribers.
Clients include AT&T Corp., (T) Sprint PCS Group, (PCS) Home Depot, Gap Inc., (GPS) Burger King, Zurich Insurance and MasterCard.
The company enjoys a unique market position because it has such a wide selection of products and services, Gear says. Though he says MapInfo has "no direct competitors," it does have rivals in its individual business segments.
Still, MapInfo should be more concerned with competing for IT dollars in general, analysts say.
"(It's) competing not just with companies directly in its space, but other companies trying to get a piece of IT budgets," said analyst Robert Becker of Argus Research.
Another challenge is maintaining its current success — especially in new sectors such as retail.
"We've seen recent success in the retail sector, but it's unclear how scalable these transactions are," Becker said. "If you sell a product or service to one retailer and have to do a lot of engineering to get another retailer on board, that's a lot of effort and expense to grow revenue." |
