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Aspen Follows Good Quarter With Internet Launch

Written By: Steve McVey
Published On: February 21 2000

Aspen Follows Good Quarter With Internet Launch
S. McVey - February 21st, 2000

Event Summary

Highlights of Aspen Technology's second fiscal quarter results were a 35% increase in license fees over the same period last year and a positive bottom line. License revenues grew to $29 million and services revenues remained flat at $32.8 million for the quarter. Aspen's license and total reported revenues were the strongest since the company's peak in the second quarter of calendar 1998. Net income for the second quarter totaled $1.6 million or $0.06 per diluted share, compared with net income of $0.5 million or $0.02 per diluted share for the same period in fiscal 1999.

CEO Larry Evans credits the stronger revenues to more sales in its core vertical markets, demand from markets outside the refining and petrochemicals industries, and increased popularity of its supply chain management solutions. It is probably too early to say whether Aspen's recent good news will begin a trend. Looking back two-and-a-half fiscal years, the period from October through December has been its strongest quarter.

Soon after releasing its quarterly results, Aspen announced it would offer a collaborative Internet portal for the process industries, ProcessCity.com. The portal offers process industry-specific news and event information, discussion forums, career guidance and employment information, and access to consultant expertise among other information.

At AspenWorld 2000, the company's annual user conference, more new Internet products are being announced, including Aspen eSupply Chain Suite, a combination of applications from its MIMI and PIMS suites, and Aspen Framework, web-enabled integration software. The products will not be available until later this year.

Market Impact

Aspen's growth has stalled in recent years, though its last two quarters may indicate a rebound is underway. Since 1995, its revenue mix has shifted increasingly toward services and maintenance of existing installations, although its latest quarter brought 47% of its total revenues from licenses. Its 1999 fiscal year percentage was 42% licenses. Aspen has embarked on two strategies that, if executed well, will improve its chances of remaining a strong player in the enterprise applications market.

First, Aspen has made its supply chain management applications the centerpiece of its core functionality and invested greater resources to support its enhanced role in the business. Aspen eSupply Chain Suite follows a previous offering (drop the "e") that was built around Chesapeake Decision Sciences' MIMI, acquired in May 1998. Unlike Aspen's older businesses, selling process manufacturing control and simulation software, supply chain products can be more easily leveraged to build applications for new markets beyond its core verticals in the process industries.

Second, Aspen's newly announced Internet product initiatives will give it a presence among the host of other e-business software players. Though it makes sense for Aspen to pursue Internet markets due to its strong domain expertise, its challenge will be in bringing the technology to bear on transforming its products for the Internet. Aspen will likely need to expand its partnerships beyond Extricity in order to accomplish its objectives.

User Recommendations

Aspen's launch of ProcessCity.com mirrors a recent trend among old guard enterprise application vendors to use Internet technology in leveraging accumulated expertise. Supply chain management rival, Manugistics recently announced plans to share domain expertise over the sponsored versions of its Internet marketplaces, bstreamz.com. In addition to benefits for participating users, the forums allow vendors to foster more dynamic relationships with customers and prospects than would be possible through corporate websites, annual user conferences, or helpdesks.

As for Aspen's other announced products, eSupply Chain and its enterprise application integration (EAI) product, Framework, it will be difficult to determine whether these are truly enhanced segments of its supply chain suite made Internet ready, or merely its existing applications linked to a web browser interface via Framework.

Most companies will make bold announcements far in advance of tangible products to build expectations among the buying public, encouraging existing clients to wait out the new releases instead of considering competitive offerings. Users should not expect to see Aspen's new eSupply Chain suite in advance of its announced May 2000 release date.

 

 
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