<B>Tech Takes Financial Hit</B>
By Jay Campbell
Depending largely on the timing of recession-style management, the economic downturn's impact is more dire for some technology vendors than others. None, however, is immune to continued weakness in business generally and business travel specifically.
Expense vendors Extensity and InterPro, of Emeryville and Pleasanton, Calif., respectively, have cut a number of jobs to lower costs as they face thinning business opportunities. Extensity's stock price began tumbling from about $9 to under $3--still above competitor Concur's, which is under $2--after a June 30 pre-announcement of worse-than-expected second-quarter losses.
When it officially reported those losses on July 16, analysts had adjusted their expectations so that Extensity was able to report "meeting expectations," but it was difficult to spin good news on what the company called an "unusual" quarter. "This was a challenging quarter. We experienced the effect of a slowing economic environment in the U.S. and abroad," said CEO Bob Spinner. "We were surprised by our prospects' reactions." Extensity cut 70 of its 300 positions to reach profitability by the 3Q02.
Smaller vendor InterPro also cut many jobs. A former executive said more than 75 percent of the workforce was shaved in May, including most senior managers and CEO Tom Heydler, who had joined the company a year earlier.
"We have made some changes," confirmed David Gould, vice president of strategic sales initiatives. "We stopped our development in travel procurement due to funding issues and terminated a significant number of employees. We continue to aggressively pursue opportunities in expense management."
The anonymous ex-exec also said InterPro has converted no new customers since last year. He noted that gaining new business would be difficult with 20 remaining employees. Customers complained heavily about customer support last year (BTN, Oct. 2, 2000).
Elsewhere in expense management, Kirkland, Wash.-based Captura and Redmond, Wash.-based Concur Technologies had brighter stories to tell. According to privately held Captura, which does not have to release public figures, it is bucking the trend of dwindling capital opportunities. "We're in the middle of a $25 million raise as we speak, and it's going pretty well," said Captura CEO Dan Vetras while on a money raising trip in London. He said the support of existing big-name investors and a "strong sales pipeline" backs the success.
At Concur, a summer 2000 restructuring that included layoffs (BTN, Aug. 14, 2000) appears to have positioned the company for tougher times as it reported slightly better-than-expected earnings for its fiscal third quarter, which ended in June. Nonetheless, despite "our fourth consecutive quarter of significant cost reductions" and a 70 percent improvement in the year-over-year net loss, Concur CFO John Adair said, "We are not immune nor do we believe that our past successes will carry us through tomorrow. We have moderated our expectations for growth in the near term, but are reaffirming expectations for profitability and positive cash flow in the September quarter of 2002."
In terms of travel booking, Fort Worth's Sabre met analysts' expectations for second-quarter net earnings of $90.4 million, up 19 percent from a year earlier. Total bookings dropped 2 percent, and 4.8 percent in the U.S., but corporate online bookings rose 156 percent. At the GetThere subsidiary, total transactions totaled 1.5 million, up nearly 90 percent, and total customers topped 900.
"Despite the downturn, Sabre gained booking share in three of our four regions and the share gap between Sabre and its nearest competitor continues to widen," said chairman, president and CEO William Hannigan. "Sabre is not insulated from the airline-booking weakness, and it would be prudent to assume second-half bookings will be as bad as they were in the first half."
That nearest competitor, Rosemont, Ill.-based Galileo International, reported 2 percent higher net income of $44 million before one-time items, meeting consensus expectations. Bookings were 6.2 percent lower in the U.S and 2.6 percent lower worldwide.
"Sabre's domestic declines were less severe than Galileo's, due to Sabre's ability to capture double- and triple-digit year-over-year growth in consumer and corporate online bookings," said CIBC World Markets analyst Paul Keung.
Meanwhile, Frankfurt-based corporate online booking vendor I:FAO reported six-month results ending June 30 that showed 67 percent higher year-over-year revenues. I:FAO said "more than 759 customers" now use its Cytric booking system.