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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: Kimberly Lee who wrote (29858)	11/18/1999 12:37:00 PM
From: gladman	Respond to of 108040

MSLV - it's got all the right ingredients: B2B, Telecom and Morgan Stanley

To: Kimberly Lee who wrote (29858)	11/18/1999 12:37:00 PM
From: Kimberly Lee	Read Replies (1) \| Respond to of 108040

Notable IPO of the day: Morgan Stanley's MetaSolv Software Inc. (NASDAQ:MSLV) Shares: 5,000,000 Amount: $95,000,000 Original Price Range: $12-$14, final price: $19 Trading will commence early afternoon today. Lead Underwriter: Morgan Stanley Dean Witter & Co. --> Summary Increasingly, telecommunications service providers, including long- distance and local telephone companies, are offering an enhanced suite of services that include Internet access and other specialized phone services. The trend towards multiple-offering services providers was jumpstarted by the Telecommunications Act of 1996, which opened up competition in many traditional telecom services. One consequence of offering multiple services is the complexity of managing customers across those services; MetaSolv provides a comprehensive solution that facilitates taking, managing and "provisioning" customer orders (provisioning refers to technical configuration of the network to deliver the service). To actually deliver a specific telecommunications service requires the coordination of different network components both inside the company and with outside partners. For example, an order for a high-speed Digital Subscriber Line (DSL) from an Internet Service Provider (ISP) can involve as many as three different entities. First, the regional Bell company, such as Bell Atlantic, has to arrange the outside wiring to the customer's premises to handle the high-speed line. Second, a completitive local exchange carrier (CLEC), such as Covad Communications (Nasdaq:COVD), which leases the actual physical copper wire from Bell Atlantic, needs to configure the inside wiring of the customer's premises. Finally, an ISP such as CAIS Internet (Nasdaq:CAIS) coordinates its network to deliver Internet service to the customer. Coordinating all three of these organizations to ensure a smooth implementation is no small task. MetaSolv eases the burden on all three participants by providing the software to track a customer order from beginning to end and to ensure smooth delivery of service. --> Investment Analysis There are several factors leading to our position that MetaSolv Software will be a strong performer, including: 1. Strong Customer Base: MetaSolv's customer base contains many leading telecommunications companies; this alone provides an important signal that the software package works effectively and that it is superior to its competitors' offerings. Some prominent customers include BellSouth (NYSE:BLS), Cox Communications (NYSE:COX), Qwest Communications (Nasdaq:QWST), Williams Communications (NYSE:WCG) and Winstar (Nasdaq:WCII). 2. Powerful Relationship with Customers and Strategic Partners: MetaSolv's first attempt at developing its software was originally intended for only one client back in 1994. The success of that software prompted enhanced and standardized development for other telecom companies. Given the early start in developing software, MetaSolv has been able to work with its telecommunications customers to develop new software offerings; this provides MetaSolv with a significant competitive advantage. In addition, it has developed relationships with prominent traditional consulting firms such as Andersen Consulting and Ernst & Young as well as Internet firms such as Portal Software (Nasdaq:PRSF) and Daleen Technologies (Nasdaq:DALN). These relationships provide valuable sales leads to MetaSolv, thereby reducing the amount of in-house marketing expenditures. 3. Quality Revenue Mix: MetaSolv derives its revenues both from licensing fees and integration and maintenance fees. Thus, once a customer decides to license the software, MetaSolv can extract additional revenue by offering its professional consulting services to help implement that software and to provide maintenance. This revenue mix provides large, one-time fees from licensing and implementation as well as on-going fees from the maintenance of the software. 4. Profitable: MetaSolv's profitability is a result of both the type of business model that it has as well as the relationships that it has with its partners. MetaSolv's sales and marketing budget has declined from 26% of sales in 1996 to only 19% of sales for the nine months ended on September 30, 1999. This is a reflection of importance of the sales leads gained from its strategic partners. In addition, the Gross Profit Margin, a financial metric that shows how much a company keeps in revenue after it pays for the cost of delivering that product or service, has remained at a relatively high rate of around 60% for the last two years. This is a result of its product being software-based, which doesn't require a lot of capital investment to produce after research and development dollars have been invested in developing the software. The future also looks bodes well from a macro perspective as the market for MetaSolv's software is expected to explode: According to MetaSolv's prospectus, worldwide spending on third-party order processing, management and fulfillment solutions by competitive telecommunications service providers will grow by over 40% per year to $1.2 billion in 2001. Expectation and final analysis: I don't need to analyze any further after noticing MSCO pricing MetaSolv a staggering $5 above the high end of the original range. This fact alone indicates significant oversubscription which in turn indicates strong aftermarket demand and support. MSLV should open at at least 150% premium, in the 35 to 40 area, and likely closing above 50 as more investors learn about the strenght of this company. -----------------------------