More pain for CRM suppliers

In the last three years, as user confidence in the effectiveness of their products progressively disintegrated, CRM suppliers battled to sustain their once-great forunes. Recent financial results from three pioneers of the sector indicate that the battle goes on.

The decline of Broadvision, which develops software that helps businesses such as BT, O2 and Xerox target ecommerce services at individual customers, has been particularly graphic.

In 2000, at the height of the dot-com bubble, its annual revenue hit the heights of $413 million. By 2003, web site software was less in demand and BroadVision’s yearly sales were down at only $88 million.

But there is no sense that the worst is over. In its fourth quarter, sales fell by almost one-fifth to $23.3 million. CEO Pehong Chen is remaining bullish, pointing to a building pipeline for 2004. But, despite a series of staff cuts, the company lost almost as much as it brought in during the fourth quarter, and cash reserves dwindled by about one-quarter to less than $79 million.

Kana Software has been shrinking, too. The vendor of online customer interaction technology to organisations including Staples and eBay suffered a 9% fall in sales in its fourth quarter and slipped into the red.

The decline in revenue came despite prolonged attempts to grow the company through acquisition; indeed, Kana’s fourteenth buy in the last five years, of closely held online customer support software supplier Hipbone, came during the fourth quarter.

But at least its cash position improved to more than $30 million, from $22 million at the end of the third quarter, helped by a recent public share offering. “If you are only burning $1 million to $2 million in a quarter, that will last you more than three years,” says the company’s CEO, Chuck Bay. “Kana has no ‘for sale’ sign – we are clearly a consolidator.”

The undisputed heavyweight of the CRM sector, Siebel Systems, is equally loath to entertain the notion of being bought out by a rival in the wider enterprise applications market. But its fortunes as an independent software company continue to decline.

Overall sales slipped another 7% in its fourth quarter. Worse, licence revenue also continued its slide, falling to $150.3 million.

Trying to remain upbeat, the company’s founder and CEO, Tom Siebel, pointed to a sequential rise of more than one-third as evidence of growing demand for its products, with new customer wins including Proctor &Gamble, Home Depot and Nokia. The company also cut its operating expenses by 39%, helping Siebel to reverse last year’s loss by posting net income of $41.5 million.

Content growth

The content management software sector has also been through a turbulent period, marked by dwindling sales and heightened merger activity. Some suppliers in the market have come through the worst of the downturn in better shape; others continue to struggle.

One relative success story has been Filenet. The company, whose customers include BP and Bank of America, grew revenue in its fourth quarter by 13% to $101 million.

That growth was driven by a 23% jump in licence revenue – arguably the most important gauge of a software company’s underlying performance and prospects. The results exceeded analysts’ expectations.

Open Text did even better, with sales in its second quarter up 43% to reach a record $61.7 million. Like FileNet, Open Text also reported healthy new business in the quarter and new licence revenue jumped 61% to $27.9 million. The growth curve seems likely to be maintained through 2004, say analysts, given the company’s spate of recent acquisitions including German companies Ixos and Gauss Interprise.

Growing demand for content management software also helped Stellent and Hummingbird to report strong numbers in their last quarters.

Stellent, a mid-tier supplier to the likes of the LA Times newspaper and the Royal National Institute for the Blind (RNIB), a UK charity, grew revenue by one-fifth in its third quarter as it signed 39 new customers and reported strong sales from existing clients.

Hummingbird, which offers data analysis tools alongside its content management software, grew first-quarter sales by 13.5% to reach the minor milestone of $50 million in quarterly sales. Analysts at Giga Information Group say that Hummingbird is doing well thanks to what they term the company’s “thought leadership” in the concept of integrating document management systems with other systems through a portal.

But while some of the content management software market’s leading suppliers enjoyed encouraging times of late, there was one notable exception. Revenue at Vignette slipped marginally to $39.2 million in its fourth quarter, despite signing up the House of Commons and the British Medical Journal as new UK customers.

A worse sign for the company was the fact that new licence revenue fell more sharply, down 10% to $16.2 million. A gain from what it called a “real estate restructuring” did at least help Vignette swing to the black, however.


Key supplier financial results – January 2004
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net inc ($m)  
Advanced Micro Devices Inc Microprocessors 4Q03 28-Dec 1,205.6 76% 43.2 -854.7
Aladdin Knowledge Systems Ltd Security products 4Q03 31-Dec 15.1 13% 1.2 -3.1
Apple Computer Inc PCs and servers 1Q04 27-Dec 2,006.0 36% 63.0 -8.0
Aspen Technology Inc Supply chain mgmt s/w 2Q04 31-Dec 80.4 -3% 3.9 -134.6
Broadvision Inc Customer targeting s/w 4Q03 31-Dec 23.3 -19% -18.9 -10.0
CACI International Inc IT services 2Q04 31-Dec 263.4 29% 14.3 10.6
Check Point Software Tech Ltd Internet security s/w 4Q03 31-Dec 115.3 5% 65.3 64.5
Citrix Systems Inc Server-centric s/w 4Q03 31-Dec 157.7 6% 36.3 39.6
Computer Associates Intl Inc Systems mgmt s/w 3Q04 31-Dec 844.0 12% 22.0 -44.0
Compuware Corp Prog tools, sys mgmt &services 3Q04 31-Dec 318.2 -4% 21.8 25.4
EMC Corp Storage &info mgmt prods 4Q03 31-Dec 1,862.5 25% 220.1 -63.9
F5 Networks Inc Internet traffic controllers 1Q04 31-Dec 36.1 33% 3.8 0.5
FileNet Corp Content management s/w 4Q03 31-Dec 101.0 13% 5.6 3.8
Hummingbird Ltd Data analysis/content mgmt s/w 1Q04 31-Dec 50.0 13% -1.3 2.0
Hyperion Solutions Corp Analytic applns &OLAP s/w 2Q04 31-Dec 156.1 24% 6.6 7.6
IBM Corp Systems, s/w &IT services 4Q03 31-Dec 25,913.0 9% 2,709.0 1,018.0
ILOG SA S/w components 2Q04 31-Dec 25.6 14% 0.3 -1.2
Informatica Corp Data mgmt/integration s/w 4Q03 31-Dec 56.7 13% 4.0 1.5
Infosys Technologies Ltd S/w development services 3Q04 31-Dec 275.9 38% 70.5 52.3
Intel Corp Semiconductors 4Q03 27-Dec 8,741.0 22% 2,173.0 1,049.0
Iomega Corp Disk drives 4Q03 31-Dec 93.4 -39% -15.5 17.8
Iona Technologies Plc Object middleware s/w 4Q03 31-Dec 23.4 -24% -5.0 -308.,0
JDA Software Group Inc Retail management s/w 4Q03 31-Dec 55.2 4% 0.2 1.0
Juniper Networks Inc Networking systems 4Q03 31-Dec 207.0 33% 14.7 8.5
KANA Software Inc Customer management s/w 4Q03 31-Dec 17.0 -9% -3.4 0.1
Lucent Technologies Inc Networking equipment 1Q04 31-Dec 2,259.0 9% 338.0 -264.0
Macromedia Inc Interactive s/w dev tools 3Q04 31-Dec 94.8 14% 10.3 8.3
MapInfo Corp Desktop mapping s/w 1Q04 31-Dec 28.6 37% 0.6 -1.9
Maxtor Corp Disk drives 4Q03 27-Dec 1,171.0 13% 38.8 3.6
Mercury Interactive Corp Appln perf mgmt s/w 4Q03 31-Dec 152.0 29% 13.1 18.8
Micron Technlogy Inc Memory chips 1Q04 04-Dec 1,107.0 62% 1.1 -315.9
Microsoft Corp PC applns/systems s/w 2Q04 31-Dec 10,153.0 19% 1,549.0 1,865.0
Misys Plc Financial sector s/w 1H04 30-Nov 772.6 -10% 37.1 25.3
MRO Software Inc Maintenance &operations s/w 1Q04 31-Dec 44.9 2% 1.8 0.4
Network Equipment Tech Inc Networking systems 3Q04 26-Dec 33.9 3% 0.9 -3.2
Open Text Corp Content mgmt/collab s/w 2Q04 31-Dec 61.7 43% 7.7 6.2
Parametric Technology Corp Engineering design s/w 1Q04 03-Jan 156.8 -9% -26.5 -11.4
SAP AG Business applns s/w 4Q03 31-Dec 2,635.9 -3% 503.4 564.1
Secure Computing Corp Security software 4Q03 31-Dec 22.9 33% 4.1 1.4
Siebel Systems Inc Customer relationship s/w 4Q03 31-Dec 366.7 -7% 41.5 -38.0
Silicon Graphics Inc Workstations and servers 2Q04 26-Dec 237.9 -9% -37.4 -17
Stellent Inc Content management s/w 3Q03 31-Dec 19.2 20% -1.9 -7.3
Storage Technology Corp Storage systems 4Q03 26-Dec 655.1 11% 71.3 61.1
Sun Microsystems Inc Workstations, servers, web s/w 2Q04 28-Dec 2,888.0 -1% -125.0 -2,283.0
Symantec Corp Enterprise security s/w 3Q04 31-Dec 493.9 31% 111.5 71.7
Unisys Corp Systems &services 4Q03 31-Dec 1,637.6 5% 111.5 89.1
Vignette Corp Content mgmt s/w 4Q03 31-Dec 39.2 -3% 10.3 -160.8
WebMethods Inc Application integration s/w 3Q04 31-Dec 50.1 -7% -11.1 -0.7
Western Digital Corp Disk drives 2Q04 26-Dec 834.8 11% 68.8 74.4
* Figures converted into $US at exchange rates averaged over the period

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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