Portable Software was best known for its Travel and Expense software when,
two years ago, it acquired a company named 7Software for its procurement
package named Company Store. The acquisition spurred a new name and a
new plan. Renaming itself as Concur Technologies, and going public (NASDAQ:
CNQR) it attempted meld current software products and new ones yet to
be acquired into a unified suite of employee-facing applications. (see
Aims To Be Single Point Of (Purchasing) Access"). In December
1999 Concur announced that it would create a marketplace for its e-procurement
customers (see "Concur's
Customers Can Network Now").
June 2000 the company announced a new operating plan and a new Chief Financial
Officer. The new plan was a formal recognition of a decision that Concur
had been aiming at for a while, to convert much of its revenues to an
ASP base. At that time the company predicted lower revenues until the
ASP revenues, which are recurring and multi-year in contrast with one-time
license sales, kicked in. This announcement included news of a layoff
of 13% of the workforce and a prediction of quarterly revenues in the
range of $12.8 million to $14 million - a loss of $.70 per share. (See
Plan, 13% Layoffs, Mark Concur's Third Quarter Disappointment")
actual results for the quarter ending June 30 were significantly lower
than those predictions made on June 8. Actual revenues were $5.9 million,
a loss of $1.03 per share. Before extraordinary costs relating to restructuring,
merger and acquisition costs, and sales returns on discontinued products
the net loss would still have been $.85 per share. The major discontinued
product was Concur Procurement. Concur, according to a company spokesperson,
is "exiting the large-market procurement marketplace." Concur intends
to develop a B2B marketplace offering for small and mid-sized companies
with partners Nortel Networks and Safeco (see "Concur
Scores A Bingo").
in the early stages, the result of the initiative with Nortel and Safeco
will probably be quite different from the Concur Procurement product.
We expect it to be an ASP-based product that requires almost no implementation
before a customer can be active - although there will no doubt be customization
offerings, and the product will certainly be built to play well with the
rest of the eWorkplace suite. Also, Concur will probably not put its own
brand on the product, but instead let it be branded and sold by the partners.
Look for a formal announcement late in the year.
In some sense the marketplace is not changed a great deal. Concur was
not making a huge splash against the enterprise procurement leaders, and
there won't be much of a pie to divide when it is gone.
do we expect the market to be impacted much by the new product. On one
hand, the small to mid-sized company market for this kind of software
is quite fragmented. On the other, we think that selling through partners
like Nortel and Safeco will be likely to bring the product to a different
set of customers from those likely to buy from a software vendor.
The users who care most about the announcement are current Concur Procurement
users who are looking at the sad inevitability of another product selection.
Other Concur customers of licensed software need not, we think, be too
concerned, although it might be wise to get some hard answers about the
company's commitment to their particular licensed product given its drive
toward a largely ASP model.
is still a technically strong company with real core competencies. However,
with current assets higher than the market value, the company is clearly
a takeover target.
this point, having jettisoned its weakest product, the company is more
likely than not to stick with the others, even if acquired. But there's
no guarantee. Therefore, we'd recommend that potential buyers of licensed
products obtain detailed profitability information on the product(s) of
interest versus the other Concur products, and negotiate pricing in accordance
with the perceived risk of the product being the next on the block (if
there is a next). One advantage of the ASP model, of course, is that the
risk of acquisition is lessened. If you're comfortable with using hosted
software and are interested in a Concur product, the ASP route might be
the way to go.