Just how does PCOR make money? Here is some info off their prospectus which can be found at: sec.gov
Overview
pcOrder is a leading provider of Internet-based e-commerce solutions that
are designed to enable the computer industry's suppliers, resellers and end
users to buy and sell computer products online. The Company leverages Internet
technologies to provide comprehensive e-commerce solutions designed to
increase sales and marketing productivity, meet end-user demand for online
ordering, reduce costs and shorten order fulfillment cycles for industry
participants. The Company's solutions include software applications that
automate product search, comparison, configuration, pricing, financing and
ordering, combined with what the Company believes is the industry's largest
content database consisting of detailed product, categorization,
compatibility, pricing and availability information.
The Company was established as a separate business unit within Trilogy on
July 1, 1993, and was incorporated on July 18, 1994. The Company began to
recognize revenue in April 1994, and has periodically released new products
and enhancements to its existing products since that date. In late 1996, Ross
A. Cooley joined the Company as Chairman and Chief Executive Officer and
brought significant computer industry experience and long-term relationships
with computer industry participants to the Company. Since that time, the
Company's e-commerce solutions for the computer industry have gained broader
acceptance, and have been adopted by market leaders including Compaq Computer
Corporation ("Compaq"), CompuCom Systems, Inc. ("CompuCom"), CompUSA Inc.
("CompUSA"), CMP Publications, Inc. ("CMP Publications"), GE Capital Corp.
("GE Capital"), Hewlett-Packard Company ("HP"), Ingram Micro, International
Business Machines Corporation ("IBM"), Kingston Technology Corporation
("Kingston"), Nortel Networks Inc. ("Nortel Networks"), MCI Systemhouse Corp.
("MCI Systemhouse"), MicroAge Integration Company, PC Wholesale, Pinacor, Inc.
("Pinacor") and Tech Data Corporation ("Tech Data"). In addition, over 500
resellers use the Company's solution. The Company's revenues have grown from
$5.9 million in 1996 to $21.7 million in 1998.
The Company derives its revenues from software and subscription fees and
related content and service fees. Software and subscription fees consist of
subscription-based and perpetual license arrangements. Prior to 1997, the
Company's software and subscription fees had been derived primarily from
perpetual licenses of the Company's products. In late 1996, the Company
commenced a transition of its pricing model to subscription-based
arrangements. Currently, the Company derives the majority of its software and
subscription fees from subscription-based arrangements, but may from time to
time grant perpetual licenses to accommodate individual customer needs.
Content fees are charged for access, entry, updating and maintenance of
computer product data and are generally contracted for on a subscription
basis. The Company's service fees consist of providing integration,
customization and training services to the Company's customers. Such fees are
generally charged on a time and materials basis; however, the Company has in
the past and may from time to time in the future provide such services on a
fixed price basis.
Revenue from perpetual licenses and software subscriptions is recognized
when persuasive evidence of an arrangement exists, delivery of the product has
occurred, the fee is fixed or determinable and collectibility is probable. In
the case of perpetual licenses, revenue is recognized immediately upon
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achievement of the above criteria. In the case of subscriptions, revenue
recognition commences upon achievement of the above criteria, but is generally
recognized ratably over the life of the arrangement. Software maintenance fees
relating to perpetual licenses are recognized ratably over the term of the
applicable maintenance agreement. Content fees are generally recognized
ratably over the applicable maintenance period, which generally commences upon
initial content entry.
Time and materials service fees are recognized as the services are
performed. The Company recognizes revenue on fixed price service arrangements
upon (i) the completion of specific contractual events, or (ii) based on an
estimated percentage of completion as work progresses.
The Company records cash advances and amounts billed in excess of revenue
recognized as deferred revenue. The Company's deferred revenue balance on
December 31, 1998 was $12.5 million. Approximately $10.4 million of this
deferred revenue is expected to be recognized as revenue within the following
twelve months, with the remaining amount expected to be recognized subsequent
to December 31, 1999. The deferred revenue balance generally results from
contractual commitments made by customers to pay amounts to the Company in
advance of receipt of products or services. The timing and amount of cash
advances from customers can vary significantly depending on specific contract
terms and can therefore have a significant impact on the amount of deferred
revenue in any given period. Deferred revenue is not indicative of the
Company's contract backlog or future revenues. The Company derives the
majority of its revenues from subscription-based arrangements which may have
pre-payment terms resulting in deferred revenue and which require renewal for
license access and service beyond the contract period. Fluctuations in
deferred revenue result in similar fluctuations in the Company's cash flow
from operations. |
