From The Street.com RE: EXLN
One week old but still relevant.
At eXcelon, Switching Lanes
to Ride the B2B Momentum
By Joe Bousquin
Staff Reporter
1/31/00 6:43 PM ET
In the horse race that is today's market for tech
stocks, sometimes it's good to put on blinders.
Giving your stag a new name can't hurt, either.
eXcelon (EXLN:Nasdaq), a Burlington, Mass.,
object-database software-maker that until
Monday was known as Object Design, has
seen its stock rise 350% since mid-October.
The rise has unfolded despite missed revenue
expectations, management turnover and a shift
in core business.
What eXcelon has done right -- at least in
investors' eyes -- is align itself with the latest
Midas touch in techland: a push into the much
discussed business-to-business area. The
stock's rise underscores how tech investors,
once blind to anything outside consumer
e-commerce, have shifted their myopic focus
to business-to-business names, and how little
evidence investors demand that companies in
hot areas can execute their plans.
Big Hopes
On Monday, eXcelon officially began its push
into B2B application software. The company's
new name is the same as the moniker for its
XML-based B2B software. That software has
become an increased focus within the
company over the last two quarters as B2B
has gained prominence in the market, with
sharp run-ups in the likes of Commerce One
(CMRC:Nasdaq) and Ariba (ARBA:Nasdaq).
The changes have inspired big hopes within
the company. Larry Alston, eXecelon's vice
president of marketing, says the effects can
already be felt.
"We announce earnings Wednesday, and I
think you'll see what we always expected could
happen if we focused on these XML products,"
Alston says. "We're excited about it."
Wall Street hasn't always been excited by the
company's results, though.
After the company reported its latest-quarter
financials, Chase H&Q analyst James Pickrel
led off his research note with the headline,
"Revenue Again Falls Below Forecast;
Lowering Numbers Once More."
Pickrel's glum review came after the company
missed his financial estimates by a wide
margin, posting a loss of 8 cents a share vs.
his forecast of a 2-cent loss. (He was the only
analyst covering the company at the time,
according to First Call/Thomson Financial.)
To make matters worse, the stock had traded
between 5 and 10 for about three years.
Off the Table
Pickrel now seems at least encouraged by
eXcelon's new direction. But in spite of the rise
in the stock price, he's not pounding the table.
eXcelon "has the potential through its new
direction to turn around the decline in its
product sales," says Pickrel, whose firm has
done underwriting for the company and who
rates the stock a market perform. "But it will
probably take a transition period to have a real
effect on the total top-line growth."
Not exactly a ringing endorsement from the
only analyst following the stock. Among
Pickrel's reservations is the fact that he
expects the company to record just $2 million
in revenue from its eXcelon software in 1999.
Total revenue is forecast at about $60 million.
The Right Buttons
Industry observers say the stock's rise
coincides with the move of other
software-makers toward the pantheon of
business-to-business electronic commerce.
"The projections are huge, and there's no
denying that it's been the hot place to be," says
Anne Thomas Manes, a senior analyst with
industry consultant Patricia Seybold Group in
Boston. "This, to me, seems like a total
refocusing. It's a whole new direction for them."
Thing is, lots of companies are making similar
shifts today. Philip Russom, an industry analyst
at Hurwitz Group, in Framingham, Mass.,
says software companies often stumble in
transitions, and that switching from
data-management software to packaged B2B
solutions is no easy task.
"People talk about crossing the chasm,"
Russom says. "I'm not sure the newly named
eXcelon Corp. realizes there is a chasm here.
And if they do, it may be a wider chasm than
they think."
Past and Prologue
That brings up what this company did in its
prior incarnation. eXcelon's old direction, as
Object Design, was in the waning business of
object-oriented database software, which are
programs that break code up into blocks for
easier management. While it looked like a
promising field in the early 1990s, the area
failed to really take off. While Object Design
was the biggest player in the space, it
eventually became clear that the space was
exceedingly small.
And management wasn't showing clear
conviction, either. The company's current chief
executive, Robert Goldman, actually stepped
down from that post last January before taking
the helm again last August. The company now
describes that time as a transitional period,
and industry analysts refer to it as Goldman's
"sabbatical."
In any case, the name change Monday helped
eXcelon stock jump 1 15/16, or 12%, to close
at 18 1/8 in a volatile session in which the
Nasdaq Composite Index slid early before
recovering to finish 1.4% higher.
Which just goes to show what it is that's in a
name. |
