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Technology Stocks : Remedy Taking a hit why? -- Ignore unavailable to you. Want to Upgrade?

To: Jonathan M. Traxler who wrote (633)	12/9/1998 4:47:00 PM
From: still learning	Read Replies (1) \| Respond to of 763

20? Don't think so anytime soon. Maybe a small bump, could be good for day trading to 13 or 14 then a quick bail. Here's a recent Soundview update on RMDY: Update Remedy Dec. 9, 1998 (FYE December) F97 F98 F99 Curr. Last Yr. Ago Ticker: RMDY Revenue ($M) 129.2 150.5 179 43.2 40.1 38.8 Price: $11.25 EPS .90 .68 .86 .23 .21 .27 52-Wk. Range: $7.75 - 47.75 Old Revenue Shrs. Out. (M): 29,500 Old EPS Rating: Hold We recently met with the CFO from Remedy who was hired permanently prior to the last quarter. The update on the quarter indicates that the sales hiring process has stabilized (approximately 20 new heads (177 total), and the new products should be available in 4Q, but not see meaningful revenue contribution in F99. Remedy has not changed the outlook for top line or operating margin for F99 (20% in both areas). We believe the expectations (reduced after 3Q) are reachable in 4Q, but until we see meaningful improvement in the predictability of sales and pipeline, we will maintain our hold rating. 3Q Details: * Sales Headcount: Attrition in the organization made headcount flat in 3Q. Management believes sales management and personnel have stabilized and should be able to report better than 10% growth in sales headcount in 4Q. We need to see evidence of improved sales productivity before we can increase our confidence in the sales model. * Balance sheet: RMDY is authorized by the board to continue to buyback approximately 2.0M more shares, but has not done so this quarter. * Y2K: The company has seen some issues with Y2K and admitted to having concerns about the global economic uncertainties and the Y2K impact to IT budgets, but mostly anecdotal evidence, as opposed to actual budget lock-downs. We think this will be evident in the second half of F99, and have reflected this in our numbers. * Big deals: Large deals like the Lucent contract (an enterprise internal helpdesk deal) are the strategic direction of the company, however telesales operation and continuing growth of web-based deals will keep the ASPs in the 20K range. * International: 28% of license revenues were from international operations in 3Q, and we expect this region to be strong this quarter. Remedy has upgraded international sales (new hires) and will look for Europe to grow about 40% y/y in Q4. * Partnerships: Systems Integrator business was strong with a revenue contribution of about 11% in 3Q, and has not seen any meaningful degradation in 4Q. Cap Gemini (Europe) and IBM global services (US) are still large * New Products: AR Web 4.0 (generally available in 4Q) is on track for release. Additionally, the new purchase requisition applications version 1.0 will be released by the end of 4Q (on plan), but will not sign up to any revenue contribution in F99 (which would imply a very slow ramp of these products). F99 will be another critical year for new product rollouts, with more employees facing applications (T&E, Timecards, etc.) * Acquisition: Baystone acquisition, a mid-market external CIS vendor (competes with Onyx, Pivotal, and SalesLogix - all private) will be closed this quarter. Remedy is entering the CIS space, but we do not expect them to compete at the Enterprise level with Siebel, Vantive, or Clarify. The deal will be for about 10M in cash in 4Q and will be taken as a one time charge of approximately 2.5M in 4Q (with an additional 2.0M in operating charges). * Competitive landscape: While the low end of the internal help desk market has been relatively quiet (Network Associates is normally more aggressive on the marketing side), the high end of the market has several participants (Peregrine and the redesigned Software Artistry - IBM) which Remedy intends to compete with more aggressively. We have seen a renewed effort from these vendors and expect the competition to remain stiff in the high end. This report is based on information believed by us to be reliable. No representation is made that it is accurate or complete. This report is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. SoundView Technology Group, Inc., and others associated with it may have positions in and effect transactions in the securities mentioned or related options. SoundView Technology Group, Inc. may make a market in the security or securities listed herein and may also perform or seek to perform investment banking services for those companies. Do not change or reproduce this report without the express written consent of SoundView Technology Group, Inc.