Verticalnet: Balancing Product and Financials …
This post is not an invitation for the usual Verticalnet-bashing community to chime in with their usual rants (please keep any comments civil and constructive on the subject). Rather, I'd like to take a quick minute to share with you a few of my thoughts regarding Verticalnet and their position in the market of late. As some of you may have already seen, Verticalnet announced a number of new product enhancements recently. From providing a new learning management system -- essentially, another way of spinning training, knowledge management, and process templates -- to building out their sourcing and supplier performance management capability, Verticalnet is not sitting still in the Spend Management technology race. This point should not be lost on current customers or those evaluating Verticalnet today.
But at the same time, despite my enthusiasm for their technology investment, I do have concerns over the company's financial position. More important, a number of customers I've had contact with in the past couple of months feel the same way (and have in fact approached me with their concerns). At least some are beginning to search for alternative providers in case Verticalnet ends up being ignored as part of someone else's giant application suite (or worse).
Since I am not a financial analyst, I will leave the specific quant analysis of VERT to others. However, in my opinion, it's my gut opinion that Verticalnet will suffer without Gene Goddick as CFO (he left last year). Gene, a former Arthur Andersen executive and a well respected accountant within the Big 5 world, stuck around Verticalnet for years, despite having the credentials and experience to serve in a similar capacity for a much larger organization.
The rather complex financing vehicles that Verticalnet was able to pull off over the past couple of years were certainly in large part the result of Gene's financial acumen. Without his ability to engineer creative financing approaches, I wonder what remaining cash-infusing options will be left, especially considering the much rumored CDC acquisition apparently fell through late last year. Now, Verticalnet will most likely have to fight it out on their own in the market. That is, unless someone like Infor decides to pick up the acquisition phone (which would be a smart move, in my book). But above all, with customers worried about their vendor's future, the clock is ticking for Verticalnet, despite their solution enhancements. It's a situation which simply can't last if their customers begin to look elsewhere out of concern over their provider's viability.
- Jason Busch
But at the same time, despite my enthusiasm for their technology investment, I do have concerns over the company's financial position. More important, a number of customers I've had contact with in the past couple of months feel the same way (and have in fact approached me with their concerns). At least some are beginning to search for alternative providers in case Verticalnet ends up being ignored as part of someone else's giant application suite (or worse).
Since I am not a financial analyst, I will leave the specific quant analysis of VERT to others. However, in my opinion, it's my gut opinion that Verticalnet will suffer without Gene Goddick as CFO (he left last year). Gene, a former Arthur Andersen executive and a well respected accountant within the Big 5 world, stuck around Verticalnet for years, despite having the credentials and experience to serve in a similar capacity for a much larger organization.
The rather complex financing vehicles that Verticalnet was able to pull off over the past couple of years were certainly in large part the result of Gene's financial acumen. Without his ability to engineer creative financing approaches, I wonder what remaining cash-infusing options will be left, especially considering the much rumored CDC acquisition apparently fell through late last year. Now, Verticalnet will most likely have to fight it out on their own in the market. That is, unless someone like Infor decides to pick up the acquisition phone (which would be a smart move, in my book). But above all, with customers worried about their vendor's future, the clock is ticking for Verticalnet, despite their solution enhancements. It's a situation which simply can't last if their customers begin to look elsewhere out of concern over their provider's viability.
- Jason Busch
The companies financial mess is in large part the responsibilty of Goddick, Lentz and a poor board of directors. They have been operating at a 2+ million dollar per quarter loss rate for almost the last 3 years. Have misprepresented their revenue potential a number of times to investors (promised to be at cash flow breakeven almost 1 year ago) and have lived off of shareholder equity to maintain the biz. Their market valuation has gone from 40+ million to under 6 million. A publicly traded company does have a responsibilty to its shareholders, one which Verticalnet has a long history of abusing.
They may have a great software suite and admirable customer list but are clearly facing an uphill battle to survive. They are about 2 months away from again being delisted, have not publicized bringing on a new customers in almost 5 months (this does not mean they have not) and have avoided honest dialogue about their future with their clients and shareholders. In the past 3 months they have lost 3 sr managers (goddick, habig), which may in fact be positive in reducing their operating costs.
They have yet to give any indication on how their q-4 results were and this would be a good time to bring on some positive news.
So from my perspective, its time for a change. Either mgt delivers on the business plan or agressively trys to sell the company. This sector has too much potential to keep providing mediocre results.
Thanks for the opportunity to chime in!
Perhaps you can leverage the financials of spendmatters to acquire veriticalnet.
Its odd that a 15 million revenue company is trading with a valuation under 6 million
Revenues, of course have gone from 22, to 20, to under 18 million under the current mgt team.
Just another interesting tidbit.