Robert, there was also the more recent "strong buy" in the Sept 10 update by CIBC Wood Gundy and the positive outlook from CM Oliver.
Factfinder, here's the complete article.
"Mpact Immedia pumps up in volume" - Financial Post. Weekend edition Sept 12-14, 1998
by Keith Damsell, Technology Reporter
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Brian Edwards (left), president and CEO of Montreal's Mpact Immedia Corp., has an ambitious US$i50-million revenue target for next year. "The dynamics of electronic commerce are so powerful, it's an unstoppable train," Edwards says in an interview. But the company's U.S. strategy is unclear, says Paul Bradley of Toronto's C.M. Oliver Ltd. "Do they want to go head-to-head with a Harbinger or Sterling, 6r do they want to do something different?" Bradley asks.
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If electronic commerce had a divine prophet, he'd probably sound a lot like Brian Edwards. The president and chief executive of Montreal's Mpact Immedia Corp. speaks with religious conviction about the Coming Age of the Cashless Society. 'Electronic commerce is everywhere," says Edwards. 'Tomorrow we're going to buy just about everything electronically.'
The executive is winning himself a devout group of followers, from blue chip clients to Bay Street analysts. But his flock won't continue to flourish on faith alone. With investor BCE Inc., the company is expected to increase its U.S. presence, stepping up the competition with ecommerce giants such as Harbinger Corp. and Sterling Commerce Inc.
The potential rewards are multiplying. So are the risks. "You have to be able to adapt to change," says a confident Edwards. "You need to be out there in the market to see the changes, and then react in time."
Change has been constant in the ecommerce business. Some 20 years ago, electronic mail was the first high-tech communications system to experiment with financial transactions. By the 1980s. Electronic- Data interchange (EDI), a complex process of transmitting data between companies via a system of computer networks, became the benchmark.
But as access to the World Wide Web, the Internet's most commercial neighborhood, grew in the 1990s, Web commerce exploded. Growth figures vary greatly, but Toronto's international Data Corp. (Canada) estimates the total amount of commerce conducted over the Web was US $2.6 billion in 1996, a figure IDC expects to swell to US $220 billion by 2001.
Mpact has been making much of the opportunity, selling software and providing network services to transmit business information. About 80% of the company's revenue comes from corporate subscribers that use Mpact as their online utility. For example, Mpact will transmit and support transactions for an auto parts dealer, receiving a small fee for each transaction. Sales of the company's e-commerce software account for 20% of revenue.
Mpact has focused on key niche markets, especially financial and mortgage services and the auto sector. Citibank, Norwest Mortgage Inc. and Chrysler Corp. are key customers. This past week, the company reported an agreement to provide e-commerce support for leading U.S mortgage and appraisal company Cendant Corp. of Parsippany, NJ.
The string of contracts has meant continued record earnings and revenue. For the third quarter ended May 31, the company reported net income of $960,000 (5C earnings per share) on revenue of $7.7 million, compared to a loss of $455,000 (3C) on revenue of $6.2 million for the same three-month period in 1997.
'This is a good little company, says corporate finance specialist Claude Ayache of Toronto's Credifinance Securities Ltd. Mpact has "been able to align themselves ... with strong blue-chip companies to service." he says. Mpact looks like a 90-pound weakling when compared to its pumped-lip U.S. rivals. Last year, Harbinger of Atlanta, Ga. reported revenue of USS127 million. Number one Sterling Commerce Inc. of Dallas. is expected to report sales of more than USS450 million for the year ending Sept. 30.
Mpact felt it needed to grow to achieve the critical mass needed to woo U.S. customers, says Edwards. The right partner would provide network technology complementary to Mpact's software and applications.
"We had to align ourselves with a telco," he says.
After speculation a deal was in the works, Mpact and BCE Inc. joined forces June4. Under the terms of the $547.2 million deal, Bell snapped up 48 million of' Mpact's shares (IFM/TSE) in exchange for $54 million in cash and Bell Emergis, the fledgling ecommerce unit of Bell Canada. Together, Mpact Immedia and Bell Emergis boast more than 400 staff and revenue of $75 million plus for the 12 months ending May 31. The deal gives BCE a 65% stake in Mpact and leaves the company cash-rich with about $80 million to finance growth.
The market signaled its approval, driving shares to a record high of $15.20 on July 9. 'This deal with BCE has made them a major player in ecommerce." says analyst Jason Zandberg of Vancouver's Pacific International Securities Inc. Unfortunately for investors, the agreement diluted the stock significantly. Mpact's number of outstanding shares has climbed to a whopping 73 million. Shares have slipped from a 52-week high of $15.85 July 9 to a recent low of $7.75 on Aug. 27, then rebounded to $10.50 as of
Sept. 10. But the company's market capitalization remains a princely $780 million. Mpact's market value is still shy of Sterling's USS3.3 billion market value, but greater than that of its competitor Harbinger, which has a market cap of USS300 million. "We feel the evaluation is high, given the comparable e-commerce companies, and we recommend investors reduce or hold their positions," wrote Zandberg in a June 4 update. The analyst's 12 to 18 month target is $10.
Although the deal received overwhelming support from shareholders, questions remain.
There's little sense yet as to how Mpact will amortize goodwill charges related to the agreement and what size these will be. A Sept. 10 research update from CIBC Wood Gundy Securities Inc. analyst Rajiv Das reiterates a "strong buy" recommendation for the stock, but excludes goodwill charges.
Mpact has revealed an ambitious revenue target of $150 million next year, but has provided few details on how it will hit the number. "I like the company and I like what they're doing," says analyst Paul Bradley of Toronto's C.M. Oliver Ltd. But its U.S. strategy remains unclear, he says. "Do they want to go head-to-head with a Harbinger or Sterling, or do they want to do something different?"
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