Transcript Project E
Project E-Storm
Page 1
Operation E-Storm
Executive Summary
Long term growth in the electronic commerce market, complimentary vision, common customer targets, and recent
equity market movement has created an excellent opportunity to assess a merger between Hurricane and Tornado
Attractive Potential Synergies
Mission/Goals - both companies are taking very similar paths in their standalone plans
Products - broader portfolio increases addressable market prospects for growth
Markets/Customers - broader vertical industry presence; could be #1 or #2 in North America
Operating Efficiency - Significant new revenue and cost saving opportunities
Various Deal Structures Possible, two have the potential to be successful
Option A - Tornado acquires Hurricane in a stock transaction
Option B - Earthquake acquires Hurricane and then merges it with Tornado
Option C - Hurricane acquires Tornado and Earthquake brings additional Hurricane shares to reach majority
ownership
Preliminary analysis shows NEWCo. is well positioned for global leadership and the deal could be attractive
NewCo - US$218 million sales, 1,400+ employees, 85% Revenues in the Americas, 10% Revenue in
Europe, 5% Revenue in Asia, no debt, $160 million cash on balance sheet.
NewCo is well positioned when benchmarked against Woody
Shareholder value growth is likely to accelerate after the transaction
Valuation premiums can result in attractive earnings accretion potential, depending on the deal structure
Current stock prices for Earthquake/Tornado in an advantageous position for a transaction
Need to agree on next steps
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Operation E-Storm
Mission, Goals & Objectives
Hurricane
Mission - To make electronic commerce pervasive
worldwide
Key Strategies
focus on B-2-B ECommerce solutions, especially large
and mid-sized companies
focus on trading community and content vs. software
applications and tools
prepare for the EC acceleration in late 1999 to 2000
50% of all revenue will be recurring by year end 1999
increase customer support per customer
leverage installed 40,000+ customer base
Key Milestones
Tornado
Mission - leading global provider of network-centric
B-2-B electronic commerce solutions that offer both
best of breed EC infrastructure and transaction
processing services.
Key Strategies
formed strategic alliance with Baan - 11/8/98
acquired ACQUION & MACTEC’s Material
Management Division
Won AS/400 Ecommerce Showcase Product
Excellence Award
Acquired Premenos and SupplyTech
acquired EDI Works! To expand its Ecommerce
outsourcing business
focus on creating communities that support an entire
supply chain
offer high value, mission critical, and hard to replace
solutions
expand globally to rapidly achieve worldwide industrial
strength status
measurably impact the client’s business via increased
revenue, lower cost, and increased customer
satisfaction
Key Milestones
created as a result of a major merger - September 1,
1998
selected by Compaq to provide payment engine for new
Internet Commerce initiative
certified by the automotive industry to provide ANXZ
services to their suppliers
selected by Microsoft to provide payment gateway for
new Site Server 3.0
Similar Mission and Strategy!
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Operation E-Storm
Markets & Customers
Hurricane
Geographical Presence - Number of Employees
or Distributors
USA
Canada
Rest of the Americas
Europe
Asia
860 emp, Y- distr.
5-10 emp, Y- distr.
10-15 emp, Y- distr.
150 emp, Y-distr.
0 emp, Y- distr.
Tornado
45 emp.; Y - distr.
400 - 450 emp;Y - distr.
none
none
None
Vertical Industry Currently Served (Y/N)
Automotive
Banking & Financial Services
Construction
Government
Oil & Gas
Retail/Consumer Goods
Sports & Leisure
Telecom & Utilities
Trade & Transportation
Y
N
N
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N
N
Y
Y
Y
Customer Segments Served (no of customers)
large (greater than $500M in sales)
medium (less than $500M, greater than $50M)
small (less than $50M)
5%
20%
75%
1%-2%
8%-9%
90%
Synergistic Geographic Markets, Industry Verticals & Customer Segments!
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Operation E-Storm
Products
Hurricane
Traditional E-Commerce - Product List
PC
Trusted Link
Mid-Range
Mainframe
Network
Emerging E-Commerce - Product List
Order Management
Logistics
Internet-Enabled Ecommere
Security - Product List
Firewalls & VPNs
Certificates
Trusted Link
Tornado
Commerce
STX
EDI/400
STX/MainFrame
ECXpert
MessageWay
Network, Net Access,
Web Hosting, Web
Serving, IVAS, INP,
Templar
AIBN, BEBN, Web Dev
TotalNet, Web Hosting,
Advantage Internet, ANX,
BuyWay
Procurement, Outsourcing
@Commerce
TrackPro
@Commerce
Express,
Templar
EdiKIt
PrimeFactors
OnWatch
Payments & Processing - Product List
Bill Payment
Bill Presentment
CAN-ACT
Bell Direct
Bill Processing
Significant Product Rationalization Synergies!
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Operation E-Storm
1998(E) Financials
Hurricane*
Tornado
Dollars in Millions ($US)
Revenue
Software
Software Maintenance -- recurring
Network Services -- recurring
Professional Services
Other
Total
Gross Profit (Gross Margin %)
Operating Profit (Operating Margin%)
Customers
Employees
$52
$24
$36
$25
$ 5
$142
$6
$45
$25
$76
72%
30% - 40%
17%
negative
45,000+
1,000+
400 - 500
(adjusted for Bell
resources)
*Source: CIBC Oppenheimer
Efficiency Ratios
Revenue per employee
Sales & Marketing % of Sales
Product Development % of Sales
G&A % of Sales
Gross Margin Breakdown
Software %
Services%
Network Infrastructure
$150,000
$170,000
20.2%
>35%
8.8%
>12%
16.6%
>25%
91.0%
62.3%
Sourced from Sprint
Sourced from Earthquake
Economy of Scale and Operating Efficiency Synergies Exist!
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Download the full unrestricted template(s) from the members area
a. Use more than one template alternative to cover all the angles
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Determine the thought areas that are critical for delivering excellence
For the “excellence areas” do a competitive benchmarking assessment by using the market research
and market intelligence tools
a. State of the industry – current status and trends
b. State of the competition – existing, new, and those in related markets
c. State of your company – get honest internal and external views
From analysis of the data in #3, develop alternative options
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different perspectives
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