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Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (10580)	4/30/1998 11:07:00 PM
From: Robert Graham	Read Replies (2) \| Respond to of 14631

Here is a "quick and dirty" look at my concerns that came out of the conference call. I will post more details when I have the time. I hope I do not need to go out and purchase fire retardant underwear! Interesting aspects of conference call: 1. No mention about their local efforts in sales and marketing, only their focus on European and other foreign sales efforts. Huh? When you have a local company like Informix that has most of their sales by a large margin currently coming from Europe, according to the conference call, I think it is time to recover on your home turf as an essential part of your future business success. Or did I miss something here? Also there was no mention about their pans for future sales efforts here in the United States. 2. No mention about partnering even though this was on the list Bob F gave in his previous conference call as an item to evaluate his future progress by. 3. Accounting by their foreign branches of the advances on unearned license revenue that is currently being questioned by the home office. This together with deferred maintenance income represents all of and more than their reported book earnings at the rate of drawdowns that was mentioned in the conference call. Also take a look at their cash position and compare to the total that they will be drawing down on from deferred maintenance revenue and advances on unearned license revenue. It becomes obvious that most of what they will be writing up as revenue on the books in the future has already been spent by the company. This woefully misrepresents the actual financial position of the company. So I would see operational cash flow as being the only significant item here, and I am talking here about cash flow from the operations on the business. 4. Most business coming from existing business relationships. IMO this is more a "vote of confidence" result than anything that has brought them the prospects of good future revenue. They need income from new customers in order to survive. I would think that many old customers were at a decision point last year and have chosen to move on to another database provider like Oracle. Once that decision is made, Informix will not see any new income from them except perhaps on special projects. So their efforts need to be focused on both their existin customer and new customers, with an emphasis on new business relationships. 5. Overabundance on special projects like UIS web based implementations. A lack of "bread and butter" sales that can lead to additional sales. However, it was mentioned that IUS is allowing them to get their foot in the door to new clients. The two sales of note is Kroger and Lucent. Kroger looks significant in that it involves each of their grocery store sites. When asked, there was no specifics forthcoming from the Lucent deal, both in up front amount of sale, and the prospects of future revenue other than that this is supposed to be a longer term business relationship, whatever that means. Also there was a mention of a new large datawarehouse account. 6. Sales problems in Europe on a leadership level. Bob F indicated there was not any specific problem that he can identify related to their problems with European sales efforts. Having to replace the leadership indicates very serious problems in this area which means Bob F does not get into any details where therre is negatives to be revealed about Informix. This has been a pattern through the entire conference call. He just entirely sidesteps the specifics here even when directly questioned. By the way, this is the region of the world which represents most of their current sales. Bob F sees that a turnaround in this area will take at least a couple quarters. 7. For cash flow purposes the have been using paid in capital. I see this number went up substantially between 3rd and 4th quarter last year when Bob F came on board. I was wondering how they were managing not to float LT debt which I would think is essential. Between the use of new equity in the form of convertable preferred stock and the substantial cuttting of costs and the use of ST liabilities, he has been able to keep LT debt off of the books. I think this is artificial and does not adequately represent the need for borrowing to finance the turnaround that is certainly to come in the future. I have more but I will end here by saying that Bob F has been operating in survival mode by for instance cutting costs to report a book profit and byfocusing on where his existing sales are coming from. He needs to progress to a much more aggressive stance which will be much more expensive in order to develop sales from new clients, which very importantly must include "home grown" sales here in the U.S. He has other executives that can handle much of the international effort for him. He should be focusing on local efforts including developing his sales and marketing staff. Until he operates this way, IMO he has not established any headway with the actual turnaround efforts of the company. Right now he has managed to reinstate a degree of credibility with the company and have it appear to tread water, even though I call this into question. I think this is what I picked up in Bob F's comments in press releases and news articles, where he realizes himself that this part of the job really has not begun yet in earnest. So I will be keeping my CCs open. I do not think there will be any big money like fund money attracted to this company yet. Also I think the analysts will cut Informix and the new CEO more slack. I still do not see any analyst upgrades of any significance coming from this. But who knows? I do not see the typical analyst asa being competent or even rational at times. They are more reactive and crowd following than anything else. Bob Graham