Shane and all-
Thanks for the excellent cc summaries.
eMRO: Some additional notes from the cc:
- they are starting very small to get the bugs out and beta test first.
- by end of 2Q99, they expect to have 20 small customers (MP2 Access) spending about $2500/month each through eMRO.
- They make around 2% on each sale, so that's $50/customer/month, or about $1000/month on this pilot program (peanuts for now).
- Once they have the bugs worked out of the program, they will give the eMRO software to customers for free and they do not pay extra to order thru eMRO (2% transaction fee comes from the supplier).
- eMRO is not a new "product" and therefore will not affect their license revenue.
- Suppliers will give exposure to DSTM as well as the 2% fee.
- Their biggest challenge was said to be cross-referencing parts, meaning that the customer or manufacturer may use one part number while the eMRO vendor (e.g. Wesco) may have a different internal part number for the same item.
- This cross-referencing process is now manual but they expect it to be automated in some fashion in the future.
- DSTM has spent $3 million thus far on eMRO.
- DSTM does not expect any significant revenue from eMRO this year.
My take is that eMRO is insignificant for now but could be a huge driver of future profits for DSTM in 2-3 years, with very little effort by DSTM.
I do not see a $3 million investment thus far in eMRO as "betting the company" at all, but it certainly points to a possible alternate business model as the market evolves toward a net-centric world.
They stressed that they are trying to be a value leader, going for market share with competitive prices, then upgrading these customers to higher priced products.
Consultants hired in 2Q99 will be productive but will not bring in revenue until 3Q99. This is normal, but they did say that the 2Q99 services margins will be reduced due to these new hires.
Several analysts mentioned DSTM "cleaning up the balance sheet", a good thing.
MP2 remains the bulk of their revenue, but MP5 is coming on very strongly.
Also interesting to note some markets mentioned were traditional--soft drink bottling is typical industrial market--but some were not: Education, telecom.
They mentioned consulting staffing as a challenge. Perhaps this will be mitigated somewhat by the drastic downsizing at DSTM's Greenville neighbor Fluor Daniel. This should pour hundreds of engineers onto the market in coming months, including some from Fluor's CMMS group.
Shane, they also mentioned ITWO, which you and I spoke briefly about, as another company like DSTM whose revenues were not affected negatively by the Y2K pullback, though they were being lumped in with the ERP crowd anyway.
That's it, just my 2 cents from the conference call. Again, appreciated all the posts. Good investing to all.
-Wright |
