Chordiant Software: Maneuvering in a Crowded Space (AMR)
Chordiant Software reported preliminary third quarter results on August 8. Revenue rose by 26% to $27.3M year to year. The company estimates that it posted a $3.0M net loss ($0.04 per share), compared with a $3.5M loss ($0.05 per share) in the prior-year period.
On a non-GAAP basis, the Q3 net loss was $1.40M ($0.02 per share) versus a net loss of $2.46M ($0.03 per share) in the year-ago quarter. Consensus expectations had been breakeven per-share results on revenue of $23.9M. The company cited lower-than-expected results in Europe and an increased investment as contributors to the net loss.
These results are preliminary because the company is continuing its independent review of its historical stock option grant practices and related accounting procedures. It also stated that a shareholder derivative complaint, alleging breach of fiduciary duty, has been filed in a court against the company as well as its current and former officers and directors.
The company
Chordiant Software provides applications to manage the customer acquisition and retention processes primarily for the financial industry, where it has a strong knowledge base, from retail banking to insurance. We believe that it can leverage its experience into other markets such as retail and, ultimately, manufacturing.
While relationship workflows have not yet seen widespread adoption, some early adopters are blazing new trails and seeing some impressive results. During the quarter, the company completed three major license transactions with new and existing customers. Recently a British wireless provider deployed contract center technology from Chordiant to tailor its services to individual customer profiles, incorporating a range of data points instead of grouping them into generic customer segments based on historic slicing of data, resulting in a 9% increase in average revenue per customer. (For more information, see “DDSN: Think Relationships, Not Transactions.”) Similarly, Barclays increased its average response rate by more than 25% in wide-scale marketing campaigns. The Royal Bank of Scotland utilized the technology to create a more robust management contact center interface, which reduced costs while increasing conversations by 12%.
Crowded space
Chordiant participates in a difficult competitive environment. On one side are the large enterprise CRM vendors, such as SAP and Oracle. On the other side are a wide range of commoditized contact center vendors that are struggling to offer any type of competitive differentiation. Chordiant’s focus on defining what it calls the “ultimate customer experience” is differentiated. However, it can easily be lost in the market’s clamor.
This is a crowded but increasingly consolidating industry, but Chordiant has a strong backlog (approximately $30.7M) and an excellent client base. Its new president and CEO, Steven R. Springsteel, was previously the CFO and then president of Verity. At Verity, he grew a profitable business through five acquisitions and guided the sale of Verity for a 72% premium in an all-cash transaction to Autonomy. That transaction closed at the end of 2005.
Oracle is an obvious choice to make the short list of potential Chordiant acquisitors, given the fit with the E-Business suite and Siebel, its acquisitive nature, and, finally, its close geographical proximity. Others could include the acquisitive Infor, Genesys, and Amdocs.
On a non-GAAP basis, the Q3 net loss was $1.40M ($0.02 per share) versus a net loss of $2.46M ($0.03 per share) in the year-ago quarter. Consensus expectations had been breakeven per-share results on revenue of $23.9M. The company cited lower-than-expected results in Europe and an increased investment as contributors to the net loss.
These results are preliminary because the company is continuing its independent review of its historical stock option grant practices and related accounting procedures. It also stated that a shareholder derivative complaint, alleging breach of fiduciary duty, has been filed in a court against the company as well as its current and former officers and directors.
The company
Chordiant Software provides applications to manage the customer acquisition and retention processes primarily for the financial industry, where it has a strong knowledge base, from retail banking to insurance. We believe that it can leverage its experience into other markets such as retail and, ultimately, manufacturing.
While relationship workflows have not yet seen widespread adoption, some early adopters are blazing new trails and seeing some impressive results. During the quarter, the company completed three major license transactions with new and existing customers. Recently a British wireless provider deployed contract center technology from Chordiant to tailor its services to individual customer profiles, incorporating a range of data points instead of grouping them into generic customer segments based on historic slicing of data, resulting in a 9% increase in average revenue per customer. (For more information, see “DDSN: Think Relationships, Not Transactions.”) Similarly, Barclays increased its average response rate by more than 25% in wide-scale marketing campaigns. The Royal Bank of Scotland utilized the technology to create a more robust management contact center interface, which reduced costs while increasing conversations by 12%.
Crowded space
Chordiant participates in a difficult competitive environment. On one side are the large enterprise CRM vendors, such as SAP and Oracle. On the other side are a wide range of commoditized contact center vendors that are struggling to offer any type of competitive differentiation. Chordiant’s focus on defining what it calls the “ultimate customer experience” is differentiated. However, it can easily be lost in the market’s clamor.
This is a crowded but increasingly consolidating industry, but Chordiant has a strong backlog (approximately $30.7M) and an excellent client base. Its new president and CEO, Steven R. Springsteel, was previously the CFO and then president of Verity. At Verity, he grew a profitable business through five acquisitions and guided the sale of Verity for a 72% premium in an all-cash transaction to Autonomy. That transaction closed at the end of 2005.
Oracle is an obvious choice to make the short list of potential Chordiant acquisitors, given the fit with the E-Business suite and Siebel, its acquisitive nature, and, finally, its close geographical proximity. Others could include the acquisitive Infor, Genesys, and Amdocs.
posted by Albert van Grondelle at 2:11 AM
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