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Technology Stocks : Gorilla Game -- Ignore unavailable to you. Want to Upgrade?

To: Jay Rommel who wrote (18)	3/18/1998 6:44:00 PM
From: Elmer	Respond to of 387

Jay, I don't think that the buyer automatically waits for SAP's product. Sure he's got SAP up and running (if it is running as last time I ask, most SAP installations were still being installed in the U.S.) and it's one stop shopping. But what this misses is that he has no a major incentive to wait until year-end to start making comparison of the products (assuming that SAP delivers on schedule). Why you say? The economics are too compelling to go ahead and install now. This explains why the length of the sales cycle is dropping like a rock from six months to currently four months for both MANU and ITWO. The reason that supply chain software is a potential gorilla category is because the paybacks are so quick. I2 Technologies states in its prospectus that its goal is "generating more than $50 billion in total value for its customers by the year 2005 through growth and savings." Now I don't understand how they calculate this number. But internally they believe they have already resulted in $30 billion of the $50 billion in value creation. Now, this is a company that has only sold about $400,000,000 in software and services in its entire history. If you place any credence on the value creation numbers, installing the software has a 75 to 1 value creation payback. So if you wait a year on a $600,000 system, you probably miss that much and more in your first years cost savings. Further, are you really going to wait and possibly find out that SAP is a much inferior product when it's introduced? And by year-end, when SAP rolls out its offering, the tornado may have already installed ITWO or MANU as the industry standard. So, I don't think you can draw an analogy to MSFT and NSCP. One last point on this. I continue to be amazed by the performance of Dell's stock. Last time I looked it carried a multiple of about 50 times trailing earnings. They have nothing proprietary about their product. It is a box that you could make in your garage and start selling. So why are they so hot. They are hot because they are good marketers and they have completely automated the manufacturing process. Intel's recent announcement on its declining revenue was, I think, in part attributed to Dell reducing its inventory (correct me if I'm wrong here). So, part of Dell's success is because it has achieved scale economies through automation. They are one of the low cost producer. What software helped them get that way. That's easy. They installed ITWO. Regards, David

To: Jay Rommel who wrote (18)	3/18/1998 7:02:00 PM
From: Wizard	Respond to of 387

In some ways MSFT/NSCP is comparable. However, there are also some pretty big differences. It seems pretty clear to me that the internet (and e*mail) can now be viewed as what the real reasons for buying a PC today. The PC is truly a communications device, not just a business productivity (spreadsheets, word processing etc...) tool. Likewise, the enterprise client-server architecture was really meant for Supply Chain Management (SCM). ERP systems are order entry systems and add value but not in the way SCM does. The ERP and SCM companies will collide but SCM can add order entry systems faster than ERP can add SCM functionality. SAP is an outstanding company with deep pockets and for gorilla game investors there is always the option of not playing (and incurring no risk). However, announcing a product is only the first step. SAP has been in the customer support market for several years and has not been a significant threat to those vendors. SAP is a formidible competitor but the market has only recently entered the tornado and so times should be good for a while. With regard to MANU's numbers, Moore would say MANU became a gorilla candidate when it reported its May quarter (in June) as that is when revenues showed their first year over year % gain of 100% growth. I would say it happened when they reported last Feb's quarterly report (license rev's grew an incredible 58% sequentially). Since then, growth has moderated and so has the stock. This is an important quarter for MANU. They should beat analysts estimates and force the street to revise numbers up in order to show renewed growth.