Concur Technologies, Inc. expects third quarter revenues between $12.8
million and $14 million. These numbers are lower than Wall Street analyst
estimates. Further, the company's loss is now expected to be larger than
analyst estimates of 70 cents per share (approximately $17.5 million).
By comparison, Concur's Q2 revenues were $10.8 million with a net loss
of $19.3 million.
a press release announcing these predictions the company blamed its woes
on its transition to a new operating model and on special charges associated
with a workforce reduction of 13% -- 68 employees. The new operating model,
to be overseen by a new COO/CFO named Stephen A. Young, calls for all
business efforts to be focused on delivering its solutions through an
ASP model. This is in reaction to an increase in ASP customers from 60
to 150 in six months. In the long run an ASP model produces a steady stream
of revenues, but during the switchover the irregular flow of license revenues
is interrupted while the ASP revenues are ramping up.
It is not too hard to imagine that one market impact of this announcement
will be the near-term disappearance of Concur as a separate company. With
its stock price around $5 - down from $5.5 just before the announcement
and much lower than its July 1999 peak at above $40 - the market capitalization
is less than $125 million, and the company held half of this as cash at
the end of Q2. This makes it a tempting takeover target, especially since
its product suite is well accepted and generally powerful (see Concur
Aims To Be Single Point Of (Purchasing) Access).
Concur once had visions of being a direct competitor to Ariba, it is now
finding its customers coming from small to mid-size companies. Although
it has not stated specifically that it will retarget its focus this way
in North America, it recently announced its entry into Europe specifically
as a supplier of ASP services to small and mid-sized companies.
As Concur goes through what may be a difficult time in the next few months
some users will see an opportunity. Companies smaller than Concur's traditional
customers now have an opportunity to gain access to powerful software
that they could previously not afford. Concur's expense reporting application
Concur Expense is a traditionally strong product and should survive any
near-term cost cutting or management changes. Concur Procurement has
less of a track record, but so long as the company remains relatively
intact it is hard to imagine an e-procurement product being jettisoned.
is the possibility, of course, that the company could be purchased for
the purpose of acquiring just one of its assets. Still, it seems very
unlikely that other ASP products would be terminated instantly and, without
disregarding the true costs of integration, one of the reasons for choosing
an ASP solution is exactly to gain some flexibility in changing vendors
- or having vendors change under you.
think that the danger for larger companies would be that Concur might
not be able to maintain itself as an innovative software developer while
running a hosting service. When push comes to shove, if there's a choice
between putting resources on development and putting them on keeping current
customers up and running, there's no real choice. And Concur's commitment
to building a trading marketplace, almost a necessary ancillary for its
e-procurement offering, is another direction the troops have to march
prospective customers do need to be cautious before signing with Concur,
we don't believe that they should drop the company from consideration
as an ASP provider. Their products will place first or second in many
evaluations, and their advantages could easily outweigh the risks inherent
in the company's current situation.