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Technology Stocks : Documentum (DCTM) Software -- Ignore unavailable to you. Want to Upgrade?

To: Bill Ounce who wrote (520)	7/25/1999 3:24:00 AM
From: Michael Watkins	Respond to of 600

Bill, Think this company has a winning product for certain business segments, but they can no longer charge the high cost per seat. The company is in no danger of failing, but earnings could be pinched. I don't see them "failing" either, but not sure they are ready for a lower margin environment. The big question is whether this concern has caused an over-correction in the stock price. Even if my concern over shrinking margins is completely off base, the correction of the stock price would seem appropriate when a growth company suddenly becomes a shrinkage company. The message coming from the execs at the begining of the year was a lot stronger than the actual results of only a few months later. A bit unsettling. A secondary question is how DCTM compares to other companies in related segments (PeopleSoft, ...) ... Several have been hit by Y2K budgets siphoning away license fees My opinion, but I have never liked DM companies being lumped in with ERP software vendors. The issues are different. DM companies stood to be hit by diversions of budget to companies like PSFT, up until the time where starting new PSFT/SAP/JDEC/etc implementations was practically no longer feasible (in advance of and in fact to address Y2K ) in very large organizations (that was last year) -- no longer feasible in mid size organizations as of the start of this year -- and pretty much now no longer feasible for even small orgnizations. and will get hit again by Y2K freezes on installing new software for a while. Certainly some orgs have been moving forward with document and work management solutions but anything very complex not already well underway by the fall is going to be largely completed in Y2000. In my mind this means more pilots, more package selection activity in Q4, and a lot more wait an see what happens Jan 1 into Feb (billing cycle). Many of my larger clients have lockdown plans and are not introducing any "new" technology once their environment are Y2K certified. One opening is that technology already "blessed" often continues to roll out. So the install base is still viable for some sales For new-new sales, I would guess Feb/March could be strong quarters for a lot of software companies that have been or are starting to be put on hold. The third question is how big potential messes from Y2K are. There could be an earnings boost after Y2K. But, if there are big messes to clean up from Y2K, the earnings boost would come months later. Overseas may be bigger problems.