Netstore Share Discussion Threads

[argy2] 17/7/2001 11:19

Given the changed prospects what will the cash position be,in say,6-12 months?

[mr ashley james] 17/7/2001 11:11

LONDON (AFX) - Shares in software supply firm Netstore PLC plunged by a
third in early deals after the company warned of a slowdown in its application
service provider market -- a warning which analysts see halving next year's
sales expectations.
NetStore announced this morning that operating loss for the year ended June
30 will be "significantly" better than expected at around 14 mln stg, while
sales for the year will be in line with expectations at 3.6 mln stg, compared
with 1.4 mln in 2000. This compares to a consensus loss expectation of 13.7 mln
stg.
However, the group warned that sales expectations for the current year are
"significantly lower" due to the slower-than-anticipated ASP market.
This led analysts to suggest revenue forecasts for the next two years will
have to be slashed, with sales for the year ending June 2002 now seen at around
6 mln stg from previous expectations of 12.9 mln.
This reflects what many analysts see as a failure of ASP -- the hosting of
third-party software applications which are rented by customers a monthly fee.
In the prospectus for its April 2000 flotation, Netstore itself quoted an
independent research study from Ovum which predicted the European ASP market
growing from 180 mln usd in 1999 to 8.7 bln usd in 2004, representing a compound
annual growth rate of 117 pct.
These forecasts now seem extremely unrealistic, analysts say, given small-
and medium-sized customers have shown no willingness to buy into the sales
model.
"ASP for SMEs is just not happening," commented Anna Bannon at Merrill
Lynch. She said the level of sales reductions going forward were "hardly
surprising bearing in mind what's happening in the rest of the market."
Netstore's statement follows the closure of US peers including Red Gorilla
and Pandesic, an ASP pioneer funded by Intel and SAP.
However, Netstore tried to reassure the market by saying it is concentrating
its sales and marketing efforts on larger corporate customers, whilst continuing
to address the SME market through OEM partners.
As a result its cash expenditure over the year was significantly lower than
anticipated. Year-end cash balances were in excess of 25 mln stg -- some 2 mln
better than anticipated with cash outflow on average less than 600,0000 per
month.
"Management are pretty sensible and they're clearly looking at what their
alternatives (to mid-market ASP) are," said Bannon.
"They're focusing on where the demand is which is on their corporate side,
while the cash side of things is fine and they've bought back costs pretty
well."
The Merrill Lynch analyst also highlighted that, at its current burn rate,
Netstore can still hit profitability in early 2003 with 20 mln stg of cash
available.
On a per share basis, Netstore currently has around 28 pence of cash per
share on the balance sheet, to which it is now trading at a 51 pct discount.
Merrill Lynch was retaining an 'accumulate' stance on the stock this
morning.
A further concern in Netstore's statement came from its comment that
significant revenue in the quarter was accelerated out of deferred revenue
balances as a result of the review of strategic partnerships.
This led to worries that the group may have changed its revenue recognition
policies to match current expectations. However, the bulk of these
brought-forward revenues are believed to relate to a major contract with NTL
which has now been renegotiated.
NetStore floated in April 2001 at 150 pence per share to raise 40 mln stg,
selling itself as "a leading European ASP with a significant first mover
advantage and brand identity in the emerging European ASP market".
By 10.39 am today, shares were trading at 13-1/2 pence -- down 7-1/2 pence
on the session, and off 91 pct from its flotation price.
bge/shw


For more information and to contact AFX: www.afxnews.com and www.afxpress.com

[mr ashley james] 17/7/2001 11:02

RNS Number:0028H
NetStore PLC
17 July 2001


Tuesday 17th July 2001

NETSTORE PLC
Trading Statement


The Company's preliminary results statement for the year ended 30 June 2001
will be announced on 13 August 2001 and a full review of trading will be given
at that time.

The Board expects that turnover for the year will be in line with expectations
at #3.6 million (2000: #1.4 million), and, at the year-end, there were in
excess of 28,000 users of the Group's ASP services (2000: 15,509).

Cash expenditure over the year was significantly lower than anticipated due to
the tight management of costs and year-end cash balances were in excess of #25
million, some #2 million better than anticipated. The current rate of cash
outflow is on average less than #0.6 million per month and is continuing to
reduce as revenues build and management continues to control costs.

As a result of reduced costs, operating losses for the year ended 30 June 2001
will also be significantly better than expected at approximately #14 million.

The proportion of recurring service revenues were lower than anticipated but
underlying growth in service income was more than 75 per cent for the year.
Non-service revenues such as implementation consultancy contributed more than
expected and significant revenue in the quarter was accelerated out of
deferred revenue balances as a result of the review of our strategic
partnerships as highlighted in the statement for the quarter ended 31 March
2001.

These results have been achieved against the backdrop of a continuing
challenging outlook for sales of the Group's services particularly to the SME
market. Whilst it is generally accepted that the SME market will benefit most
from the ASP model of software delivery, trading experience shows that it is
the medium to large enterprises that are the early adopters. Also, it is
collaborative applications such as messaging and systems management solutions
that these larger companies are prepared to adopt today on an ASP model,
rather than line of business applications.

Accordingly, Netstore is concentrating its sales and marketing efforts on
larger corporate customers both directly and through its Partner VARs, whilst
continuing to address the SME market through OEM partners.

At the same time, Netstore will continue to develop its professional services
offering as an essential component in larger deals. This is expected to be an
increasingly important source of revenue as well as securing future recurring
ASP income.

The Board expects that Netstore will continue to achieve organic growth in
revenues as its end-user base grows. The rate of such growth will, however,
be dependent on the rate of development of the ASP market, which is currently
happening more slowly than previously anticipated. As a result, sales
expectations are significantly lower but costs and cash expenditure have been
cut accordingly to maintain the objective of driving the business towards cash
generative trading as early as possible.

The changes outlined above will enable the Group to continue to consolidate
its market leading position whilst also reducing the rate of its cash
expenditure to low levels. This will leave the Group well placed both
strategically and financially to benefit from the further development of the
ASP market, which the Board, with corroborative evidence from many of the
world's leading IT businesses, continues to believe is inevitable.


The financial highlights above do not constitute financial statements under
section 240 of the Companies Act 1985 and are unaudited. The financial
information has been prepared on the basis of the accounting policies set out
in the Group's statutory accounts for the twelve months ended 30 June 2000.


Netstore: 01344 444300
Gary Smith,
Neil Lloyd

Buchanan: 020 7466 5107
Charles Ryland

[cyan] 11/4/2001 10:24

HarryKewill ,thanks for the response . I am convinced there is a future for ASP's. My concern is there was too much hype and the projected growth in ASP revenues globally is increasingly looking like pie in the sky. There will be substantial growth but the concern I have is whether all these new players will last the course. I was looking today at EQUANT's figures published on 28th March 2001. EQUANT for those not familiar describe themselves as " a leading global provider of seamless data networking services to multinational businesses". They declared last quarter revenues for 2000 of $434.8milliom; (loss of $47million). What interested me was what was said about Application service revenues. For the last quarter 2000 they declared a 20.4% increase to $6.5million which sounds good. However they went on to state that they have seen a slow down in demand for internet based retail commerce applications. Therefor they intend to "rationalize" employment and close sales offices and have pencilled in restructuring costs of $2.0million for quarter one 2001. The question is NES really on target to make profits by mid 2003. ASP's have had something of a problem getting themseves accepted. There is now so much competition in a period of market slow down. IT directors will be looking and asking the question "am I going to tie my company to an ASP provider whose actual medium term survival may now be considered a gamble" This may seem a pessimistic view but ASP's have gone under ie. HotLogic. NES does appear to be in a strong financial position until 2003. The problem is the big boys with deep pockets are not going to make life easy for new ASP's and time is on their side. I am not convinced NES will be independent in 4 years from now.
Best of luck to all ASP investors.

[reetus] 23/2/2001 00:33

Looks like some activity this morning

[reetus] 20/2/2001 13:12

2 Huge cross trade just gone through at 38p and the price still hasn't moved. Very high volume of 3.6m today. Does anyone know if these cross trades were definitely buys, as there has been no immediate jump in the share price, which seems a bit odd.

[mendoza] 19/11/2000 21:06

ASP: anyone still paying?
By Matthew A. DeBellis
Redherring.com, November 20, 2000
If you remember the business model affectionately known as the application service provider (ASP), start trying to forget it.

The business of hosting third-party applications for a monthly fee hasn't taken off. And despite the news this week that one publicly traded ASP received hundreds of millions of dollars to stay alive, those watching the young ASP market say the model is fatally flawed. Much like what is happening now in the business-to-consumer (B2C) market, the ASP business is on the verge of thinning out through shutdowns and mergers, analysts and venture capitalists say.

ASPs that have already shuttered their doors include Pandesic (see "ASPs: Easy come, easy go"), once deemed a pioneer in the ASP industry, funded by Intel and SAP. Red Gorilla shut down last month after less than a year in business, unable to raise additional venture capital. Partners at Utah Ventures, believed to be Red Gorilla's sole VC backer, didn't return phone messages.

Other ASPs are tightening their belts. Interliant (Nasdaq: INIT) in September laid off 300 workers in hopes of saving $12 million a year. Futurelink reported last month that it would cut 75 jobs, or ten percent of its workforce, to try to speed up the time it takes to break even by four to six months. It now hopes to break even in early 2002.

Because dozens of ASPs have formed, sprouting like B2C startups did in 1999, it's likely that more are in bad shape and on their way out. The companies in the worst condition are those hosting software published by third parties, says Rich Shapero, managing partner at Crosspoint Venture Partners. He suspects that investors may start to bail out on many of the hundreds of ASPs that will soon be hurting "if all they're hosting is someone else's applications."

Several ASPs, realizing they can't make it alone, are in merger discussions, says Harry Fenik, executive vice president at Zona Research, a technology market research firm. "We're going to see a bunch of [ASPs] get married," Mr. Fenik says.

FALLING DOWN
It didn't take long for the ASP business model to fall from the heavens. A year ago analysts, the press, and startup CEOs held the business model up as an example of how customers would pay for software. Instead of licensing software and having in-house technology staffers maintain it, companies would pay a monthly service fee to use software developed by name-brand firms such as Oracle, Microsoft, and J.D. Edwards, pundits said.

Several unprofitable companies went public on those aspirations, including Corio (Nasdaq: CRIO) and USinternetworking (Nasdaq: USIX). Corio's shares dropped 16 cents to $3.91 per share on Wednesday; its stock price is down from a 52-week high of $21.75. USi's shares dropped 27 cents to $4.73 per share Wednesday, down from a 52-week peak of $71.63.

"They are hosting stuff that was never meant to be hosted," says Gary Steele, CEO of Portera Systems, a 90-customer ASP that designs and hosts its own software for computer services organizations.

ASP cheerleaders were on target about how customers want their software delivered -- over the Internet -- but mistaken about how to make money on such an arrangement. It's too costly to host and expertly manage third-party software to build businesses that will continue to grow, Mr. Shapero contends.

VERTICAL FEAT
One way ASPs can become profitable is to turn themselves into so-called "vertical service providers" (VSPs), says Michael Sherrick, a consulting and application services analyst at Morgan Stanley Dean Witter. "It's not just about hosting applications," Mr. Sherrick says. "It's about offering application and business services for a specific vertical or horizontal market."

VSPs offer customers more than basic business software. They are the main contact for all technology services that can be delivered over the Internet to a particular market.

Crosspoint has committed a whopping $350 million to 14 companies in this space in the past two years. One of those companies, VitalLink Business Systems, provides almost 2,000 restaurants with faster credit-card verification, real-time cash register tallies, music, and video surveillance over broadband Internet pipes, Mr. Shapero says.

Just this week investors propped up USi, pledging $300 million in equity and credit. Among them are Microsoft, which invested $50 million; wireless services firm Aether Systems, which committed $10 million; USi executives, who pumped in $60 million; and GE Capital, which promised $50 million in credit. USi CEO Andrew Stern was unavailable to comment.

SMALL BUT FIERCE
Some small ASPs are showing signs that they can make the model work. Vation, based in Chicago, will have 30 customers and become profitable by the third quarter of next year, says chief operating officer William Ryan. The firm designs software that integrates software made by Art Technology Group, Epiphany, and Interwoven.

Vation has six customers now and expects to sign four more before year-end. The company is looking for $10 million in second-round financing, and when management talks about the company's profit plans, venture capitalists are surprised, Mr. Ryan says.

Other ASPs are telling venture capitalists they will break even in 2002, he adds. Vation is growing at a measured pace. It has 60 employees and will open a second office in the San Francisco Bay Area this month; it will have a total of four or five offices when it turns profitable next year.

"The market has put a lot of pressure on us to perform," Mr. Ryan says. "The expectations are higher."

--Additional reporting by Lawrence Aragon

[peter00] 10/7/2000 19:05

NetStore has just hosted the largest 2000 Installation system for Microsoft at TechEd (nice t-shirt freebie!!)It was used by 8500 delegates and demonstrates the high regard that Microsoft has for NetStore.Interesting to see where the partnership develops.

[angelmouse] 24/6/2000 00:09

been too busy buying stock and helping out people..... the biscuits were delicious!

[craigmer] 22/6/2000 19:31

hi angel longtime no speak !!!!!!!!!!

[angelmouse] 21/6/2000 21:03

You may be interested to know that two of the top investment banks Lehman brothers and merril lynch have just written an independant report for their customers about Netstore ( company that mangaged to float despite the tech mark crashing all around it at the time of floatation). The report was extremely positive about it as a business and is freely available from them.
As an extra titbit, Netstore's chairman Paul Barry-Walsh who co-founded the company and another called Safetynet, has just sold Safetynet and made £70 million personally. So Netstore looks like another success story. Its stock went up today.