orporate executives are formulating business strategies to take advantage of the Internet and the enormous potential for electronic commerce. The driving forces for the acceptance of E-commerce will be the push for business process reengineering, reduction of operating costs, and profitable Internet-based business opportunities. For help in these activities, more than 30,000 businesses look to Sterling Commerce, the leading independent provide
r of E-commerce software and services. Here's why.
Sterling Commerce, a spin-off from Sterling Software, has become a force in electronic data interchange (EDI) and Internet-based business-to-business solutions. The company offers E-commerce services, message management and communications software, interchange software, and payment-processing services. Software generates 60% of total sales, while services represent about 40%. Some 60% of total sales are recurring revenue based on software maintenance fees and services.
With a strong direct sales force, Sterling Commerce is a major presence in the banking, manufacturing, retail, and pharmaceuticals industries. Its high customer-retention rate and ability to leverage its clients' trading partners into new business translate well to the bottom line. It's little wonder that Sterling Commerce has formed strategic relationships with almost all of the major application and implementation partners like SAP, Information Builders, Baan, PeopleSoft, and Anderse
n Consulting. It doesn't hurt that Sterling Commerce has a good relationship with its former parent, which continues to sell the spin-off's products internationally with 50% royalties paid to Sterling Commerce. Royalties still represent almost 8% of total sales. But the three-year distribution deal will end in 1999.
Sterling Commerce is also growing through strategic acquisitions. With a $400 million war chest and $6 million a month in free cash flow, Sterling recently acquired Comfirst SA, a leading automated data-transfer software company in France, and Automated Catalogue Services, an electronic catalogue publisher for businesses. Future acquisitions will probably be in the same mode.
If the company continues on its business path and with its acquisition strategy, I expect 1997 revenue to exceed $340 million. With operating margins of almost 35%, earnings per share for the fiscal year ending in September will be around $1. I project growth in the 30% range for both revenue and earnings per share t
hrough 1998.
William Schaff is chief investment officer at Bay Isle Financial Corp. in San Francisco, which manages the InformationWeek 100 list. Reach him at
bschaff@bayisle.com
.
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orporate executives are formulating business strategies to take advantage of the Internet and the enormous potential for electronic commerce. The driving forces for the acceptance of E-commerce will be the push for business process reengineering, reduction of operating costs, and profitable Internet-based business opportunities. For help in these activities, more than 30,000 businesses look to Sterling Commerce, the leading independent provide
r of E-commerce software and services. Here's why.
