VERBATIM TRANSCRIPT OF THE TPRO CONFERENCE CALL 11/14/97 - Part 6
Q&A (cont.)
Skip Davidson - First New York Securities
Q: A couple of questions if I might. The 4 companies that you mentioned today, they all came from internally generated leads?
A: JJ - The four companies, I'm sorry Skip.
Q: Cyprus, Kennecott, Unilever, and Ivax.
A: JJ - Oh, yes. No, sorry. Ivax was not. Ivax actually came to us as a result of a relationship with business system level IT service company.
Q: OK, and was I correct in hearing you that, in the press release you said that there's approximately 3000 plant sites, but you addressed 3500 potential plant sites at approximately $20,000?
A JJ - Well here's the way I'd say that. The page I have in front of me as a pipeline actually has an even larger number of plant sites on it. One of the problems we have is defining plants. You've got some organizations that have 800 sites. All of those aren't worthy of spending $20,000 on tools. So what we do is try to come up with a sort of and equivalency model, and that model is the 3500 number that I threw out, which is different than in the press release because I have a different page - updated. To say that all of those are candidates for $20,000 tool purchase, yes they are candidates for that. It will depend on whether the client - (a) how brutal he is in terms of negotiating a corporate license and/or (b) how much he wants to buy service as opposed to tools. But certainly we're only scratching the surface and that gives you a view of the early potential that's really come to the table in the course of 45 days.
DK - John's comments, Skip, are referring to the plants that we currently have in our pipeline. Potential market, which I think is where your question was is what's the size of this total market?
Q: Yes sir.
A: JJ - Then we go back, Skip, there's every reason to believe that - I have this line in my presentation that the universe is 70,000 plants in the US that have more than 100 employees. That's very real. Beyond that, as we said before, you've got the whole utility substation population. You've got small refineries, gas plants, QA labs, all those kinds of things. I still believe that the total opportunity size here is using that $20,000 average for tools, using that $20,000 average against that 70 - 100,000 band width. Service is a different issue. I've used a number in the past of an average of maybe a $300,000 total cost for a typical plant to go from assessment to remediation. I have no reason to back away from that at this point.
Q: One of the comments that we constantly hear in the business is, "Show me the money" and "This is not a real problem." And in your last conference call Mr. Hagewood got on and said that when he joined you that he could not believe the opportunities. Two weeks later, they were huge, and three weeks later they were getting comments, "Help!" Mr. Owen is joining you from someone you have an alliance with. What was his reason for coming to you?
A: JJ - His reason is that - actually, I should have addressed that earlier. Fluor Daniel started out as a very positive alliance, and for whatever series of reasons, Fluor Daniel has decided that they will not internally, are not going to emphasize Y2K. So that alliance is not particularly valuable to us. The interesting thing in parallel was we thought that was going to be important in the beginning to get access to corporate clients at multi-plant site opportunities. Its turned out that we don't need that. Word of mouth and our own direct selling and the uniqueness of our product is getting us there as fast or faster than working with Fluor. Owen's decision to join us simply is he sees its a huge opportunity. He's frustrated by the Fluor position and lack of responsiveness and wants to come and work for an organization that's smaller, faster, and has got its sights set on what he sees as a very real business. To the underlying question about whether this is real or not, (chuckle) everything that we're doing , our data base at this point has like 4500 items in it which a total of between 30% and 40% are either clearly non-compliant or suspect. And there's enough wisdom out there at this point - there are some people that are still in denial, and bluntly said, we're not spending a lot of time with those people. They'll wake up at some point along the line. There are other people who take this very seriously. I think I used in some discussion in the past, its not just a question of whether your plant shuts down. One of the issues in the food industry, as an example is, if it shuts down, actually that's probably the preferred alternative. The other alternative is you have some little wrinkle in there that is not readily discernible, and something like the fat content in your cheese product goes from 0.1% to 0.5% and you don't even know about it until you've got the line full. Those are the issues that really have clear thinking people concerned. The utility industry is at an early state of awareness. There are a lot of apocryphal jokes going around about being concerned that the lighted ball that comes down in Times Square is still lit when it gets to the bottom. Things like that. But there is a much greater state of awareness today than there was 30 days ago and its increasing and people are taking it seriously.
Q: Forgetting your base business for a second, which we shouldn't do, but after 1/1/2000, will the Y2K business still be active?
A: JJ - Yeah, the projects that will evolve out of this, it'll be a triage effect of what do I have to fix now, what can I Band-Aid, limp across the line and fix later on. The other part of this that we keep coming back to is that the forcing function of Y2K is that the business system people will be awakened to the value of the information that exists at the shop floor level, the control there, and there'll be a lot of work done, we believe, to pull that information up into the business systems, which is a theme we've been pounding for years and hasn't previously been well received. So the whole Y2K experience is going to open that up dramatically as well.
Moshe Spitzer - Smith Barney
Q: Is there any other companies that are developing a product such as yours that you may know of or do you have any kind of stiff competition with this product that you have out, this CD-ROM?
A: JJ - At the CD-ROM level at this stage, there's nothing that we are aware of. From a competitive stance, there is one large engineering company who is doing project based work in this arena , but at this point, that's it.
Q: OK, and is it fair to assume that they are far behind you as far as everything, their development?
A: JJ - The other company that I was referring to is really approaching its business as sort of what I call a typical Architect & Engineering business where they're just doing project work. They are not pursing this from a tools standpoint at all. That doesn't say that that won't change, but if you look at the massive effort required by us to get this CD crunched through, I think in a large organization, for them to respond quickly enough, dedicate the resources and get it done, at this point, they're 6 months away, and 6 months from now showing up with a tool would be a little bit late. That's my view. |
