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CEOCFO CEOCFO Monthly Analyst |
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click on print" Solutions!!
Technology Vertex
Interactive, Inc. CEOCFO Interviewer:
Ceocfointerviews:
What are your core products and what do you offer to the public? Mr. Toms: What
we offer is supply chain execution solutions; all of the software systems that companies
need to receive and process their orders, to manage their orders, to manage the
fulfillment of their orders, and to manage the delivery of goods to the customer…all
in a timely fashion. In terms of supply chain collaboration, we facilitate the connecting of different
participants, including the enterprise users and their business partners, up and down the
supply chain to provide a product to an end-user. Both suppliers and customers are
connected, using the medium of the Internet, to communicate and share up-to-the-minute
information. Companies can proactively recognize opportunities early and capitalize on
them. In addition, they can identify problems
early and address them before they become more costly and disruptive. Ceocfointerviews:
Do you deal with the different security issues and viruses? Mr. Toms: We take all the proper measures to
ensure that a company’s current infrastructure meets the highest level of security
whether we are implementing our systems in a wide or local area network environment. If we feel a company’s level of security is
not satisfactory, we will identify these gaps. Viruses are executable files that most
secure environments will not allow through their firewall.
In terms of our software systems the executables are processed on the server side,
with only the presentation layer that is sent through to the client. Ceocfointerviews:
How are you getting the word out there so they know this is a better solution to their
problems? Mr. Toms: We
have incorporated all methods of marketing communication to build awareness of our
solutions and their benefits to the marketplace. First
of all, we are focused on a few key vertical markets. Pharmaceuticals, which is our
largest single market, consumer packaged goods, wholesale food, third party logistics;
which is an emerging space where we automate the systems of companies that provide their
customers with an out sourced order fulfillment solution. We also communicate our message
through seminars, advertising, business partners, consultants, market analysts, public
relations, and other marketing techniques. In addition, we frequently receive referrals
from existing satisfied customers. The optimal users for
Stradivari Web are usually in the range of 20-50 simultaneous RF users. Being web-based, Stradivari Web is suitable for
all sorts of operations including third party logistics companies where their customers
can use the web to access real time status of their inventory. For example, Calvin Klein
may have a supply of apparel in someone else's warehouse.
With Stradivari Web, they could access real-time inventory availability and check
the status of a customer’s order from fulfillment to delivery. Doing this over the
Web is a very cost effective means of communication. Ceocfointerviews:
So you are dealing with the smallest of companies to the largest? Mr. Toms: We
do have a lot of middle market business, yes, but most of our customers tend to be Fortune
one thousand, type companies. We deal, for
example, with every pharmaceutical company here in the United States such as Merck, Pfizer
and American Home Products. We are
headquartered in New Jersey, and the pharmaceutical industry is headquartered in New
Jersey. Pharmaceutical companies tend to be
very large, cash-rich and recession-proof companies to say the least, but they are
certainly companies that continue to perform above average in a down economy. In
consumer-packaged goods, we deal with people like Estee Lauder, Imperial Tobacco and in
the food industry we are dealing with companies such as ConAgra, McLane-a division of
Wal-Mart stores, among others. Our list of
third party logistics customers includes leading companies in that industry such as Air
Express Inter-national, and ABX Logistics, which is one of the ten largest third party
logistics companies in the world. We are
also dealing with big names in automotive, for example BMW, Mercedes, Ford, and General
Motors. In the automotive industry, we have our biggest penetration in Europe, principally
in the UK and Germany. Although, we have
products that meet lesser needs, our typical customer is usually very large and
sophisticated from an information technology point of view. These are the companies that
clearly realize the full benefits and immediate return on investment that our systems have
to offer. Ceocfointerviews:
With all the areas you cover is there any one specific product or area group that meets
the majority of the revenue? Mr. Toms: We
have a line of light-directed order fulfillment solutions at our DCS division. These
systems are complimentary to our supply chain solution offering and are important to our
business. This year we will account for over
20% of total revenues in this one single division. Second to that, we have a number of
inventory warehouse management systems and solutions built around our SAP practice that is
probably the second biggest part of our business with somewhere around 15% to 20% of our
total income. Approaching very quickly, now
that the product is deliverable, is our e-business suite of products, which includes e-OMS
(Order Management), e-WMS (Ware-house Management), and e-TMS (Transportation Management). This e-suite of products is on its way to becoming
the key to the whole enterprise. Architected for e-business, the e-suite of products
provides real time insight into inventory availability and increases a company’s
selling capabilities by providing suggestive selling and promotional opportunities.
Vertex’s e-suite of products effectively allows users to process an order from the
moment of promise, to order entry, right through to transportation and delivery of goods
to the customer, all via the Internet. Ceocfointerviews:
Besides North America and Europe, is there any other market that you see yourselves
entering? Mr. Toms: We
would like to penetrate the market in Asia, and South America in particular, as well as in
the Middle East and Africa. When I say we are
in Europe, we are primarily in Western Europe, however we are increasingly looking to
extend ourselves further east. But for our
market, the supply chain market is mostly centered on North America and Europe and that is
why we initially chose those two geo-graphical areas.
That is also where a lot of the big multi-national roll-outs originate. For instance, in the apparel industry, one of our
customers Saati, is based in Italy, but has operations in Europe and North America. We are rolling out a system to them Worldwide, at
11 locations, 5 or 6 being here in the US and the rest in Europe. That rep-resents a typical Vertex customer. Ceocfointerviews:
I know technology is always changing and you have to get it out to all of your customers
basically before your competition does. How
do you keep up with that? How much do you
spend in R&D? Mr. Toms: We
have a very good R&D team that keeps our core product up to date with the needs and
trends of the market. Unlike many other
software companies in the world, we do partner for certain other products. We don’t
pretend to have the resources to build everything necessary. We take a very close look at
what we need to keep in house and what can be outsourced or acquired through various
partner alliances. So, there is a twin track. If there is a technology that we don't own and we
think we ought to, and there is someone else who developed it, we are quite aggressive in
going after and acquiring that technology. We
recently announced a very important transaction for us that upon its close will represent
a merger with a company of equals called Plus Integration in Holland; press release is
published. This company, being approximately the same size as Vertex, develops front-end
customer interfacing and customer relationship management software, which we will
interface to our execution and order fulfillment piece.
This is a typical situation where we are trying to reinvent the wheel from the
ground up. That is true with
everyone in our space if you look at our competitors you will see that they have all been
acquiring technology primarily because in technology you certainly cannot build all of the
pieces that you will need. This particular transaction is slightly enlarging the concept
of the supply chain because the software we will acquire, and merge into existing Vertex
enterprise applications, will provide the front end customer relationship segment and a
lot of the data mining software to dynamically connect customers in real time to the
inventory of product that will supply their needs. That is the ultimate goal of the supply
chain, to connect the customers to their inventory.
Ceocfointerviews:
When do you feel this company will feel the full impact of the acquisition and start
benefiting? Mr. Toms: Well,
we have to go through the SEC and get their approvals and that process will take until the
end of this calendar year, 2001. So, we will
not actually merge until end of this calendar year or in the beginning of next year. However, we have already develop-ed a plan of
integration. We are starting to do joint
selling and have currently identified ten common existing customers where both Plus and
Vertex products are already integrated. We are initiating the integration process based on
those current implementations, as well as adding any necessary pieces to start the
amalgamation of both products well before the actual completion of the deal. If by chance
the deal goes sour, we will have developed a good business relationship that can provide
future opportunities. If all goes well, we
will have a great head start. The first benefits, I think, because of the time between
signing and closing will be felt almost immediately after the merger both from a revenue
and cost point of view. We have started to integrate a lot of our systems and combine our
resources, all the while saving costs. Ceocfointerviews:
I know the market was down, people were scrambling around to find qualified personnel to
fill positions and today it is the opposite. Are you taking advantage of this situation? Mr. Toms: I
think what has happened is…the answer is yes. Sadly, because among other things, the
whole IT business is in a down turn. The positive side is that there is a much larger
available pool of talent to help us. We are
always looking to enhance our current staff with added talent, which at one time may have
been difficult, now we are finding more available. There
are many exciting and promising things coming up. Ceocfointerviews:
It's a good thing. Mr. Toms: It's
an opportunity for us because there are very good and talented people who are now
accessible who at one time would not have been available to us. From a personal
perspective, it's not a happy one but the talent and availability is a great help to us. Ceocfointerviews:
After this acquisition will you consider more? Mr. Toms: Yes,
what we have been doing for the past eighteen months has been assembling the backbone
infrastructure of a supply chain management software company on the execution side. Having
done this there has not been a great deal of core technology that we need to assemble to
offer the complete solution. Additional acquisitions will be more for scale and
consolidation. Ceocfointerviews:
Because the technology industry has been hit hard on WallStreet, has it affected your
company? Mr. Toms: Well,
obviously when the stock is down, as so many stocks are, including our own, it does limit
our flexibility in terms of being able to effect transactions, there is no question about
that. We are focused on building and growing
an asset base to take advantage of the huge market opportunity facing Vertex. Our goal has
been and continues to be returning long-term value to our shareholders, and from
today’s depressed equity valuations, we believe we can. Ceocfointerviews:
There are other companies like yourselves in the same arena, what makes your company
different from them? What is it that you are
doing that they cannot do or will not do? Mr. Toms: One,
we are the only company with web native JAVA products, no other company has that. Number two; we are the only company that currently
operates on the scale that we do based in Europe and North America. So that we can provide
on the ground sales and support in all the major economies in Europe, including Germany,
Italy, France, the UK and Ireland. We have a
very strong footprint that differentiates ourselves from anyone else in the supply chain. In particular, we have a lot of very talented
people in Europe who can sell to European customers, utilizing their language and customs
that are specific to their particular country. That is very important for big European
companies. A lot of our peers have had
success in selling to the affiliates of US based companies in Europe but have not done a
great deal of up front selling to actual European based businesses. We have done that and
feel that it is one of our very distinct competitive advantages. Ceocfointerviews:
Obviously you want to attract new investors. What
do you think they should be looking at? What
can you tell them that may sparkle a little bit of interest? Mr. Toms:
We are determined to be one of the surviving major players in the supply chain market
space. Based on revenue, we are positioned as
the number six provider of supply chain systems, behind I2, Manugistics, Manhattan
Associates, Kewill, and EXE. In the supply
chain execution space, we are the number three player.
We believe that the supply chain market is very under developed, under exploited
and very under penetrated. AMR and other industry research companies that study and
forecast this market further validate that even in today's economy, there is still an
attractive growth opportunity. We are very
well positioned to capitalize on that opportunity. The
other thing that is very attractive about our piece of the IT business, unlike other areas
it is very easy for us to demonstrate high returns on investment in hard dollar terms. When we go into a particular company we can
demonstrate efficiencies that they will realize. For
example, we went to Merck, they were operating at 14 distribution centers and we took them
down to three existing centers. We shortened their fulfillment time, the time it took for
the order to enter the system to the time the order left their shipping dock from the
distribution center, from 24 hours to 4 hours. In the case of emergencies, a hospital
running out of penicillin or something, we can get that order out in under an hour. It
doesn't matter who the customer is, it may be Rite Aid, or the store on the corner, we
will give them the same quality of service. In
addition, there were other cost savings; the head count went from 1,100 down to 160 in
that particular division. Merck was then able to reassign the remaining people to other
primary positions within their business. These
kinds of efficiencies are incorporated as part of our sales process so that the customer
understands what they will get back in hard dollar sales. On top of that, there are all of
the intangible benefits, like what happens when your customer puts their order in and you
get it out within a couple of hours. It all
leads to wonderful customer relationships. If
your systems are accurately fulfilling the order and picking the right inventory, you have
a similar loyalty because you become a problem free solution. Our systems are all designed to help our customers
become better business partners with their customers. That is the big driver. That is why
people should invest in us because I think we have very strong positions in certain
vertical markets, our systems offer immediate R.O.I., and our footprint is particularly
large, in this particular market, at this particular time.
Ceocfointerviews:
Is your company financially situated going forward? Mr. Toms: We
have a lot a very strong shareholder base and they have indicated support and we believe
we will have the resources to go forward.
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