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Technology Stocks : Open Text

OTEX 33.09

+1.6%

Nov 21 9:30 AM EST

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To: JF Quinnelly who wrote (29)	11/24/1996 10:05:00 AM
From: Gary105	of 1195

It will be a while on this one. On the + side, they have a very large cash cushion and the stock is under accumlation (A rating in Investors Business Daily). Also the intranet business is THE place to be. On the - side: while their revenues are growing very fast, much of the growth is low margin service business. If we look at the most recent quarter, their license fees ($2+ million) was flat with the June quarter. Almost all of this is operating profit. But they have operating expenses of $6+ million a quarter. So to break even they need about $5 million in license fees (they do generate some margin from services). At roughly $100/seat - this corresponds to 50,000 seats per quarter. I don't see it yet in their press releases - they will be the key to future earnings. Look for losses to continue. Re. intranet - the big players are IBM (includes Lotus) and Netscape. They are a guppy swimming with sharks. Re. Jetform - + article early this year in Indiv. Investor, their business is electronic forms and it appeared to be doing very well.

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