Building the future of e-business
Analyst on Macromedia, the Net software sector
By Colleen Bazdarich, CBS MarketWatch
Last Update: 3:41 PM ET Jan 26, 2000
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SAN FRANCISCO (CBSMW) -- Solutions, solutions, solutions.
It's the buzz word in e-commerce, but few
have done as much "solving" as Macromedia,
the software company that made
e-Christmas that much more interesting last
year with Flash, the uber-software of the
Web when it comes to showing off and
attracting users.
Browsed any big name sites and wondered
where all that multimedia wizardry came
from? Probably Flash. And with
business-to-business on everyone's mind
lately, Macromedia should be one to watch
as they report this week and into 2000.
Analyst Greg Vogel of Bank of America
Securities in San Francisco talked with
Colleen Bazdarich of CBS MarketWatch about what investors should
be looking for from the report and from the e-software sector in general
for 2000.
CBSMW: Macromedia and BroadVision software are reporting
Wednesday. What should we be expecting from those companies?
Vogel: Well, I think more of the same, which is some pretty strong
fundamentals. Both companies have done a marvelous job of capitalizing
on the growth of the Internet, in particular the move towards e-business.
They've been providing everything from enabling e-commerce to ...
personalized targeted marketing capability.
Macromedia (MACR:
news, msgs) is the
leader in providing
software solutions for
constructing the look
and the feel of a Web
site. Every browser
that is shipped --
whether it is from
AOL (AOL: news,
msgs) or Microsoft (MSFT: news, msgs) or Netscape -- they all come
Macromedia-enabled. You get Flash content, for instance, automatically
with any of those browsers.
If you are a Web site designer and you want to create some multimedia
content, you're going to create it in the format that everyone is going to be
able to view, obviously. Right now there is a real competitive market.
There are a lot of sites out there and they want to attract as much traffic as
possible, so you want to make your site engaging. In order to do that you
need to add something besides the dull text and graphics that have been
pervasive on the Web. So with increasing bandwidth and the need for
something a little more jazzy, people are using Macromedia software to
put that together.
Meanwhile, BroadVision (BVSN: news, msgs) does a lot of the back-end
stuff that kind of goes on behind the scenes -- we need one more widget,
we need something to post financial transactions for the financial systems.
CBSMW: Do you have any sales estimates?
Vogel: For Macromedia we are looking for revenue of $64 million and
earnings of 12 cents per share. We think that given what they have done
in the recent past, I will call those estimates conservative.
CBSMW: You're expecting even better reports then?
Vogel: Yes, I think that is fair to say.
CBSMW: How does this $64 million third-quarter sales compare with
third quarter last year?
Vogel: Third quarter last year was 39 percent so
the year-over-year growth (in) total revenue would
be 65 percent.
(Editor's note: Macromedia reported $65.5 million
in revenue and earnings of 15 cents per share.
BroadVision came in at $43.7 million revenue and
9 cents per share to beat analysts' estimates of 6
cents EPS.)
CBSMW: Do you have "buys" on Macromedia
and BroadVision?
Vogel: We have "strong buys" on both of them.
CBSMW: Everyone has been talking about
business-to-business solutions. What do you
think we are going to be seeing in 2000?
Vogel: Business is still predicated upon a site. So
say General Motors is doing business-to-business
e-commerce with its suppliers -- the suppliers are
connecting to General Motors (GM: news, msgs)
either directly through the GM site or they are going
through a business-to-business exchange such as
Commerce One (CMRC: news, msgs) or Ariba (ARBA: news, msgs), for
instance. They still need a site -- they still need e-commerce.
Wal-Mart (WMT: news, msgs) for instance, set up a system using
BroadVision to sell product to their customers. You can also use
BroadVision to sell or buy product from their vendors. All this is kind of
infrastructure that can do business-to-business or business-to-consumer.
CBSMW: So you think business-to-business is going to continue to
be a big trend in 2000?
Vogel: I do. The whole idea or notion of disintermediation is a powerful
one. The ability to cut costs is compelling. For highly fragmented markets
where geography matters or there is a limited market of how many buyers
I can purchase form, if I can aggregate all those vendors into one location
and go to that location over the Internet, and I can compare all their prices
and I can compare their inventory, I am probably going to get a better
price. I may also get delivery faster and other additional benefits. So it
makes a lot of sense.
CBSMW: Do you mostly have your "buys" on business-to-business
software companies?
Vogel: Actually, I don't think it really matters. I am focused on the
software segment -- where these guys are selling software for
business-to-business and business-to-consumer vendors. You have
analysts that cover Amazon.com and you have analysts that cover
Commerce One. I don't cover either of them, I cover the software
companies that sell to those guys so that they can build their sites. They
are both buying the software, so I don't really care.
CBSMW: Who do you have your "buys" on, then?
Vogel: I have "strong buys" on Vignette (VIGN: news, msgs) -- they are
doing largely content management. If you come to the site, you are getting
the content that you are specifically interested in. If I go to an e-commerce
site I am not going to want to hear about women's clothing, etc. I might
want to be directed to sportswear, etc.
BroadVision is a "strong buy" for more of the e-commerce infrastructure,
the back end; Macromedia for the putting together the tools to build the
look and the feel of a Web site.
Allaire (ALLR: news, msgs) does tools for building the back office --
some of the same stuff that BroadVision does, but built from scratch.
(Editor's note: Allaire reported Wednesday with revenues of $18.3
million, earnings of 3 cents per share.)
CBSMW: Any specific risks here for my long-term investor who
wants to get into Net software?
Vogel: I would say that valuations are fairly high now, but at the same
time, in the long term business-to-business is such a large trend that I
expect fairly significant revenue growth for the foreseeable future.
One of the things about technology is you always have to make sure your
company is staying on top -- that is always the risk. I think that over time
companies like BroadVision and Vignette are going to increasingly
compete with each other. That doesn't mean that both of them can't do
very well, but you still have to be careful. Right now they are continually
innovating enough to stay ahead of the market.
Colleen Bazdarich is a personal finance reporter for CBS
MarketWatch.
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