ome of the fastest-growing companies in technology are not involved in networking, computers, or even semiconductors. They're in the seemingly mundane arena of telecommunications billing.
In the rush to deregulation, most communications companies-includ- ing long-distance carriers, local exchange carriers, competitive local ex- change carriers, and operators of cable, wireless, or satellite networks-require billing services to deal with an explosion of customers, services, and rates.
With more service providers entering the U.S. market, and with the European telecom services market set for wide-open competition in 1998, the demand for billing services and software should take off, a trend that bodes well for billing companies. Industry estimates for billing and related services and software are between $13 billion and $17 billion, with annual growth of at least 25% expected over the next few years.
A leading provider of telecom billing software
solutions and support is Saville Systems plc, an Irish company that offers flexible, customized solutions to midtier telecom providers, including many of the local exchange companies.
President and CEO John Boyle says his goal is to make international sales at least 40% to 45% of total sales in two to three years. Overall, Saville's license revenue is expected to increase from 20% today to 35%, while service-bureau revenue will decline from 80% to 65%. Strategic acquisitions will be critical to help meet these goals as Saville supplements its technology with data mining and call-center functions.
Saville's staffing rose to 750 at the end of the first quarter, from 640 at the end of 1996-an increase of 17% in three months. The company has not seen the human resources and hiring problems that many software and consulting firms are running into.
In spite of its leadership position in a strong market, Saville's total sales in 1996 were only $54 million, though that was up almost 78% from 1995. I proj
ect Saville should earn $1 per share on about $88 million in revenue during 1997, and that earnings per share will grow between 35% and 40% into 1998. For the latest quarter, Saville's gross margins were nearly 60%, while operating margins increased to 27%, up almost 6% from last year.
No, Saville's stock is not cheap. But given industry growth and the company's superior technology and high-quality management, Saville can easily justify the current pricing. It helps that management and other insiders own 22% of the company. Investors like to know management's interests align with theirs.
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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ome of the fastest-growing companies in technology are not involved in networking, computers, or even semiconductors. They're in the seemingly mundane arena of telecommunications billing.
