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The market opportunity
is wide open for ClearStory Systems as they bring their Enterprise Media Server product to the
Business Software & Services
ClearStory Systems Inc.
One Research Drive Suite 200 B
Westborough, MA 01581
Henry F. Nelson
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
December 1, 2005
CEOCFO: Mr. Nelson, what
was your vision when you came to ClearStory and how has that developed?
Mr. Nelson: I first joined the company as INSCI. The
company was in a mature market and had a number of operational challenges. My vision was
to first turn the organization around to profitability, then focus on growth for the
company within a broader, growing market. Since then we expanded our product offering
through acquisition, broadened our market presence, and re-branded the company as
ClearStory Systems. We continue to execute on this growth strategy.
CEOCFO: Will you tell us
what you are doing now that is different?
Mr. Nelson: Our original focus was on the management of
fixed content, or documents such as reports, statements, invoices, and other transactional
content. Our customers for these solutions are in highly regulated industries, such as
financial services and healthcare. These companies are faced with big pressure to archive
this content for regulatory compliance reasons. We began to shift our product development
with the goal of empowering our customers to re-purpose this compliance content for
customer-facing, high-value solutions such as online statement presentment and
customer-service document solutions. We also saw a tremendous opportunity for solutions
that manage the most rapidly growing forms of content in companies today. Rich
media, or digital assets, which include video, JPEG image files, graphics, branded
content, and multimedia presentations is a growing challenge for global corporations. We
made an acquisition in this space, which has fueled our growth strategy moving forward.
CEOCFO: Who is using
your newest services?
Mr. Nelson: The target market for our newer rich media
solutions have a high need for the management of digital media. These include media,
entertainment, publishing, and advertising. Our customers in these markets include Sony
Pictures Entertainment, Scripps Networks and Martha Stewart Omnimedia, and BBDO Detroit.
Another big market includes the marketing departments of Fortune-1000 or consumer brand
companies that are looking to get more value out of their investments in rich media and
brand-related content. We help them leverage digital media in demand generation, customer
programs, product launches, etc. Customer examples here would include Bristol-Myers
Squibb, Smuckers, and Nintendo.
CEOCFO: You have two new
products; Enterprise Media Server and ActiveMedia Server, what are they all about?
Mr. Nelson: Enterprise Media Server or EMS is our pure
J2EE platform for developing rich media solutions. We can sell this product to developers
or through systems integrators for the creation of specific rich media applications. We
ourselves leverage the EMS platform for ActiveMedia. ActiveMedia is our digital
asset management (DAM) application, which provides out-of-the box capabilities for the
capture, management, and delivery of digital media content. Since it is built on EMS,
ActiveMedia is a third generation DAM application, which offers scalability, flexibility,
and a powerful security model to meet the rapidly evolving needs of our market."
CEOCFO: Are you working with IBM?
Mr. Nelson: We signed an agreement with IBM (NYSE:
IBM); and are working with their digital media services group and the content management
group. We have completed integration with DB2 Content Manager, we support DB2 Universal
Database, and we are in the process of completing our port to IBM WebSphere Application
Server. Right now, we are in the process of rolling out our solution within the IBM
CEOCFO: That should make quite a difference for you!
Mr. Nelson: We hope that it is going to increase the
revenue stream. We certainly believe that this will expand our market opportunities and we
need to take advantage of them.
CEOCFO: Will you tell us
about the financial condition of the company?
Mr. Nelson: We are backed by a company called SCP. They
are a private equity group located in Wayne, Pennsylvania. SCP and our management together
own approximately 72% of the company on a fully converted basis, so they are very
committed to ClearStory. They have continued to fund the company through restructuring and
more importantly, through the growth phase by providing the capital for the acquisition of
WebWare and the development of our new EMS platform, which helped us expand into the rich
media market. They have been a very supportive group and we expect them to continue to be
CEOCFO: Will you tell us
about the competitive landscape?
Mr. Nelson: Digital Asset Management is an emerging
growth market, and still not 100% defined. We have a number of competitors, each of which
comes at the market from a slightly different domain perspective. Our challenge is to
determine the right business solutions for the right markets, and bring those to market.
In this rapidly evolving market, there have been a number of digital asset management
vendors that have been acquired by large organizations, but they have not necessarily seen
great traction. The opportunity for us is wide open.
CEOCFO: What do you do
in the next year or two to take advantage of that opportunity?
Mr. Nelson: From a strategy standpoint, it is one of
tactical execution. We need to build out our sales team and rapidly expand our digital
asset management product suite. To expand our market presence, we need to execute on our
new agreements with companies like IBM.
CEOCFO: Do you need to add to your management team to get
Mr. Nelson: I have a completely new management team
from the group that was in place when I first walked in the door four years ago. It
includes a full complement of individuals in every area. I am very comfortable that we
have the folks that can execute on our business plans.
CEOCFO: What is the
Mr. Nelson: Right now, our revenue model is very
typical of a small software company. We see about 60% of our revenue coming from software
licenses. Our ActiveMedia application is available as an optional hosted service. This
allows us to sell the solution on a subscription basis, which gives us a recurring and
consistent revenue stream. Approximately 30% of our ActiveMedia clients have selected the
hosted model and we see that as a significant competitive advantage going forward.
If we look at our competitors in the marketplace, no one is offering a hosted model on an
enterprise scale. We can support multiple companies on one instance of our software, which
gives us a competitive advantage and cost-effective business model.
In addition to licensing our application, we also
license our platform for the development of custom solutions. We have executed three of
these licenses in the last twelve months. These are very significant license opportunities
from a monetary standpoint. Our client can leverage our modern architecture and use our
extensive set of APIs to build their own application or vertical market solution. We also
believe that provides us with a significant competitive advantage by opening multiple
doors for distribution.
CEOCFO: In closing, tell us why should investors look at
ClearStory Systems now?
Mr. Nelson: We have a growth opportunity with a proven
product for a growing market. We have invested millions of dollars in the development of a
next-generation pure J2EE services oriented platform, and we have built out marketing,
sales, and services to bring the product to market. With these significant investments
behind us, we can focus on execution and growth. Now its just a matter of time as we
execute our strategy.
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