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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: WaveSeeker who wrote (80748)	1/27/2000 9:16:00 AM
From: Lane Hall-Witt	Respond to of 120523

Does anyone have experience with, or thoughts on DSTM? This is a company that sells software and services for capital asset management: MRO (maintenance, repair, and operations). Their software enables companies to keep electronic records on its capital equipment, spare parts, maintenance personnel, repair scheduling, budgeting, etc. DSTM has 55 percent of this market with more than 50,000 installations for 27,000+ customers in 129 countries. It serves more than 60 percent of the Fortune 500. Customers include the following: AT&T, Caterpillar, Dow Chemical, Georgia Pacific, Hewlett Packard, Kaiser Permanente, Kroger, Toyota, American Airlines, Bausch & Lomb, Chevron, and Dell. What's interesting about the company is that it has now fully integrated its MRO software with its iProcure B2B electronic commerce site. Traditionally, the MRO software alerted users whenever inventories got low -- triggering a purchasing process that was usually conducted manually, by phone or fax. Now the MRO software can trigger an online purchasing process that is conducted fully over the Internet via iProcure. The iProcure site was just launched last fall, but DSTM has announced that more than 100 customers are already using the system to make purchases. The iProcure client list includes Lear Corporation, International Paper, Standard Products, Morgan Marshall, and Dean Foods. Here's some market data on MRO purchasing: total MRO market, $220-300 billion annually, depending on which source used; MRO purchasing conducted electronically in 1997, $3 billion; MRO purchasing to be conducted electronically in 2000, $71 billion (estimate). The company has also launched a B2B auction Web site called BizSurplus.com. This is a marketplace -- very small at this point, based on the number of items listed on the site -- where businesses can exchange excess MRO inventory directly. DSTM is profitable. Estimates for the December quarter, which it's announcing next Tuesday (Feb 1), call for the company to make $0.12. That would bring FY1999 earnings to $0.66. FY2000 estimates are for $0.80. The projected five-year growth rate is 21 percent. FY1999 P/E based on projected $0.66 earnings is 28.4. Forward P/E based on projected FY2000 EPS of $0.80 is 23.4. The company's main problem seems to be that its traditional client-server database market is mature. The company has responded to this by aggressively incorporating the Internet (upgrade of client-server applications to Web-enable them, iProcure B2B e-commerce site, and BizSurplus B2B auction site). It has also developed WinCE-based mobile devices that are integrated with its software suites. The Net and information appliances would appear to be growth drivers going forward. I see a lot to like with this company, given its installed user base, seamless integration of electronic B2B into its products, and history of profitability. But the stock has yet to catch on -- which makes me wonder if I'm missing the dark underside to this story. I'd appreciate any input.