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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Shane M who wrote (5558)	12/25/1998 2:40:00 PM
From: Wright Sullivan	Read Replies (2) \| Respond to of 78747

Shane- A little background on DSTM follows: (sorry, this runs very long; it's all on DSTM so please skip if not interested). Datastream Systems is a local (Greenville SC) company, and Larry Blackwell (founder/CEO) is known as a very smart and straightforward person. Datastream is a pure play in Computerized Maintenance Management Systems. What this means is that they sell software ("MP2" and "MP5") which is used by manufacturing companies to plan and track maintenance work and parts. Specific functions of the software include: Work order scheduling; maintenance personnel scheduling; equipment repair history and reporting; spare parts inventory and automatic purchasing; asset management; service request processing; statistical predictive maintenance; and electronic data interchange (EDI) as related to maintenance costs. MP2 is Datastream's NT-based client-server product, typically used on a plant site-wide basis. MP5 is Datastream's Unix-based product for enterprise-wide installations. An example of an MP5 installation is the multimillion dollar contract from earlier this year with Southern Company (parent of GA Power & Light, etc.) for MP5. I do not have any current numbers for the ratio of MP2 sales to MP5 sales. MP2 has been by far the best selling Windows CMMS package for years. Datastream mostly sells directly to customers, and more often than not they also do the consulting work on the installation (i.e. the applications software as opposed to the packaged software MP2 or MP5), which often runs several times the cost of the software itself. Datastream's sales have been growing well, and they have made several overseas acquisitions of smaller companies in the CMMS business. However, they have been criticized for their accounting practices of writing off the purchase price of acquisitions as R&D cost. In my opinion, their handling of these writeoffs has been very poor, but they have been punished to the point of creating a significant buying opportunity. The growth thus far has remained intact. One additional wildcard opportunity: DSTM has a new product, e-MRO, which gives their software the ability to automatically reorder spare parts (using the internet, of course), with DSTM getting a cut of something like 2% of each order. Management is playing down e-MRO, but its revenue impact could be very significant down the road. IMO, the business-to-business commerce potential of the internet is huge, and DSTM's software, which already recognizes when spare parts need to be ordered, is a very logical beneficiary of the internet. I don't want to put too much emphasis on the e-MRO internet commerce stuff. With all the internet hype, it's almost a turn-off to hear about a company's plans being tied to the net. But DSTM doesn't figure e-MRO into their projections, which makes me comfortable. What does DSTM have to do with ERP? While CMMS is DSTM's only business, it is also one of the many "tentacles" that an ERP package such as SAP typically offers. Unfortunately, the ERP vendors' offerings are typically nowhere near DSTM's capability. Therefore DSTM could be an acquisition target of one of the ERP vendors, especially one focused on serving manufacturers. The CMMS market is nowhere near saturated. I do automation consulting work for companies who would benefit greatly from DSTM's software, but while all seem aware of the benefits of CMMS, only a small percentage have really done the work to implement a complete CMMS program. Most are too busy struggling with their ERP implementations to focus on reducing maintenance costs with CMMS. But those costs will be addressed eventually, no doubt about it. All this and I have still not said much about the numbers. I have not re-crunched all the numbers since a year or so ago, and all the "R&D" (acquisitions) make it less than straightforward. But with DSTM around 9 and their growth continuing, I don't see too much downside and loads of upside. But as Paul Senior says, "I have been wrong many times before..." (I have kept pretty quiet since recommending CHKPF-Checkpoint Software-at 30 a few months back on this board. CHKPF, a firewall outfit, went from 30 to 11 back to 40. That ain't investing; it's more like Mr. Toad's Wild Ride at Disneyworld). Bottom line for me is that DSTM is a company which I am comfortable with, a market leader with strong growth and a relatively low stock price. I welcome any comments. My apologies if DSTM does not fit with this board's mission of finding blatantly cheap value plays. My other local favorite, CNSO, clearly does, but it's just another cheap microcap, and there are plenty of others in that space. I like CNSO because it is so simple that even an engineer like me can crunch the financials with confidence. DSTM's financial numbers are not simple, but the products and growth are.