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Special thanks to IBD for the following:
ASPECT DEVELOPMENT INC. Mountain
View, California Software Maker Gets Its
Parts Back In Order
Date: 2/12/97
Author: Michael Tarsala
Aspect Development Inc. can take a punch.
The software company's stock fell almost 13 points after its third-quarter
results were announced. That's because license revenue missed the mark
investors had expected.
However, the company came back in the fourth quarter. Chris Mortenson,
an analyst with Alex. Brown & Sons., says Aspect beat his license revenue
prediction by 10%. Total revenue and earnings were also up.
''There was an unfortunate slip-up in the September quarter,'' Mortenson
said. ''Since then, they've done a good job of correcting. We're still very
positive on their business.''
Buying electronic parts can cost companies a small fortune, says CEO
Romesh Wadhwani, who founded Aspect in 1991. He bet if he could
make finding bargains on parts easy, he would reap a profit.
His gamble is paying off. Component-supply software is still a small
market. The entire industry takes in only about $150 million in revenue a
year, says David Dury, Aspect's CFO.
But it's growing. Industry sales are increasing about 45% a year, reports
Robertson, Stephens & Co.
The future looks good for Aspect in particular, according to Robertson
Stephens. The securities firm predicts Aspect will have 59% annual sales
growth during the next three years. It calls Aspect the leader of an
''early-stage high-growth market.''
Alex. Brown, Robertson Stephens and Soundview Financial Group Inc.
underwrote Aspect's May IPO. The stock's initial price was $20. It's now
trading near 27 1/2 under the symbol ASDV.
Aspect doesn't have any strong stand-alone rivals, Dury says. It competes
mostly with customer-built systems.
Aspect battles two small private firms that together control a quarter of the
market, Dury says. Aspect controls the rest.
The company sells two main products: Explore software and VIP
databases.
The Explore software has a powerful search engine. It looks for the best
price on thousands of parts. It can locate hard-to-find parts, too.
It works on a variety of client-server based platforms. The software runs
on PCs or UNIX clients. It uses UNIX servers. It can also run on the
Internet and intranets - corporate networks based on Internet standards.
Explore can make a significant difference in speeding up the product design
process, Mortenson says. It can also be used to get the best parts deal.
''I've heard from companies that there are clear and immediate paybacks
from using the software,'' Mortenson said.
Explore fits perfectly with IBM Corp.'s reengineering goals, says Bjorn
Andersen, IBM's director of strategic business applications.
IBM wants to shorten the time to market for its computers. One way to do
that is by re-using technology that already works, Andersen says. IBM
plans on using some parts as ''building blocks'' in a variety of its products.
And they've employed Aspect's software to help them do it.
Andersen says IBM is just starting to use Aspect's software. He can't put a
number on the savings yet. But he says the company spends between $20
billion and $30 billion a year on procured electronics parts.
''If we save just 1% a year, that's a large amount,'' Andersen said.
Aspect's software also works with software from other companies. For
example, IBM plans to use Explore in conjunction with another company's
product-management software.
Software sales are almost always one lump sum. But Aspect also gets
recurring subscriptions revenue from its VIP databases. They list 1.5
million parts from over 600 component vendors.
The VIP databases should help the company manage its fast growth, says
James Mendelson, an analyst with Soundview Financial.
Many companies such as IBM use the VIP databases in conjunction with
the software.
The databases bring in between 30% and 35% of the company's revenue,
according to Dury. Explore accounts for between 50% and 55%. The rest
of sales come mostly from consulting fees.
Some of Aspect's well-known customers include electronics giants
Allen-Bradley, a division of Rockwell International Corp.,
Hewlett-Packard Co., Eastman Kodak Co. and Motorola Inc..
In the second half on '96, Aspect introduced databases servicing other
markets. The company branched out into electromechanical parts last year,
and added a database for bolts, screws and other fasteners in July '96.
''We plan to do other things like automobile and aircraft,'' Dury said. The
company will add more databases over the next six to 12 months, Dury
said.
And recently, Aspect unveiled its new Web site. Instead of sending
customers database updates each month, it now refers them to updates
available on the Web. Within the next three months, the company plans to
carry advertisements from parts vendors on its page.
By year-end, customers should be able to order parts through the Web
page, too.
For the fourth quarter ended Dec. 31, Aspect's net income rose 346% to
$1.44 million from $323,000 in the year-ago period. Revenue rose 72% to
$7.43 million from $4.32 million. Earnings per share were 10 cents, up
from 3 cents.
(C) Copyright 1997 Investors Business Daily, Inc. |
