JF: MapInfo turned in a profitable quarter.What reasons can you give for turning the corner and showing positive revenue growth?
MH: This is a process we have been working through over the last 18-24 months, trying to make sure you align the cost of your business with the revenue stream.We have taken the opportunity to really go through and restructure a lot of our businesses and business processes and doing things more effectively.And we actually had a pretty decent quarter in Q4 as well, and, we felt like we had "righted the ship" at that point and then we slipped a little bit in Q1.And Q1 is always a tough quarter for us and in the past it has always been held up by a couple of renewable telecommunication deals in the quarter; they weren't there in Q1.So, if you look at Q2 this past year as well and take out some of the restructuring costs that we did, it would have been a break-even quarter.We're actually starting to trend back up, where three out of the last 4 quarters would have been break-even or profitable.
So, we do feel like we have turned the corner from the standpoint of
being profitable and our targets next year are to be profitable in every
quarter, and I am sure that Q1 will be our biggest challenge again.But,
you know the world is changing out there, and we are really trying to look
at what are the right opportunities for growing and how can we focus our
resources on these areas.Otherwise, just trying to get growth out of the
traditional business will continue to be challenging.We think we can grow
it, but I think in the base business of what you do, we're probably talking
single digits growth until you hit on some of these major initiatives.
JF: So what opportunities are you looking at if it isn't the core business, the software business?
MH: A couple things, we certainly believe that Homeland Security will be a good opportunity for us.I think we've done about $1.8 Million in the Homeland Security area so far, and there is still a lot of things that need to trickle out in terms of how budgets get allocated and, spent, and approved and all those things as well.We've actually been involved in some pretty hefty RFPs in that area.It actually lines up with some of our public sector crime pattern analysis that we've done in the past. That's part of the core business, but our big focus, will be as we get more exposed to these verticals; we've really learned a lot about 'retail' in the last six, seven, eight months since we've acquired Thompson (Associates) and we've gotten some pretty good synergies in the retail space with those customers with MapInfo technology.And we really have the intelligence now to build retail applications because we are a lot deeper in that vertical.
We're also doing a lot of things on the insurance side; we've actually got some new partnerships that we are working on together to take to market some more vertically focused, deeper solutions.So, we've made a lot of progress.As a company we've been transitioning to do solutions for a while but we've made most of our progress since April of last year, where we've had some focused teams, gone out and done some research and met with customers.
JF: So is the plan to go deeper into vertical solutions and drive
MH: Yes.Our belief is that what clients are going to want from a technology perspective is being able to deploy a stable platform that has a more business-focused solution on top of that.So, we've worked a lot on our engineering side, on our .NET initiative and also with our MiAware product on the Java side to make a robust enterprise platform where it makes it easier for our customers and our developers and professional services people to build strong, flexible applications on top of that.
JF: Are you still on track to release MapInfo Professional on .NET?
MH: Yes, if you think about it, our MapInfo Pro clients are not really requesting that it needs to be in .NET; it is more the developer community who wants to implement something as a web services platform in a Microsoft environment; those are the ones asking for .NET.Actually our first releases of the product will be right after the first of the calendar year in the March timeframe, right around our MapX and MapXtreme product. By the end of our fiscal year is probably when the Pro product will be released, and that's the right way to do; that's focused more on what customers want.
JF: You said you were waiting for some opportunities to fall in the
Telco area.Is that a market that is also turning the corner?
MH: Yes, we do.We're not counting on it to save us; and we certainly don't expect it to return to the levels it was before.Absolutely it has increased activity, more RFPs and more actually purchasing.I forget what the mix was in telco last quarter but it was a pretty good mix again.We have a pretty good mix again from public sector and from retail and now telco.So, we have three verticals that are doing pretty good.
JF: Now that you are six or seven months now down the road with Thompson
Associates, is your intent to keep that organization separate or integrate
it more into the MapInfo organizational structure?
MH: That's a great question.As announced as part of the acquisition there is an "earn out" period to that acquisition to where they have the ability for us to pay them more money for the business based on the performance. So, during that period you are able to do less integration than you would like, because some of their priorities is being autonomous enough to drive that through, although we have been successful in doing some of that.And we've done that by, for instance, they bring MapInfo into some of their previous accounts and there are sales done, we will give credit towards that "earn out" so we are trying to get some of that stuff done before hand.After that, we will be able to completely do an integration of the business and we really want to take advantage of the retail domain experience and get the technology lined up in that sector.
JF: Do you see the retail sector doing well? Thompson's contribution margin to
you is good.Do you see retail as a growth business?
MH: What's good about the Thompson acquisition is that it does well, when the retail sector is doing good.And is also does well when the retail sector is doing bad because they help them decide which stores to close and therefore.So, that part of our value proposition works both side of that equation.But our success moving forward in that vertical; you know the services business is harder to scale and needs to be complimentary to what we do.So, if you are going to replicate, and drive fast growth in that sector, it's really going to be more on solutions and applications side complimented by services.So, we have a great bunch of people there that really understand those business problems.So, that's one thing you forget when you make an acquisition like that besides revenue and profitability, you are getting an awful lot of intellectual property that's inside people's heads.
JF: Going back to .NET, have you figured out a pricing model for
web services using MapInfo products; for example, when a customer comes
to you and says they want to build a solution pulling MapInfo technology
as a web service?
MH: No we haven't figured it out and it definitely will be a challenge.And part of the issue is that you don't have enough customers asking you for it in any kind of volume where you can figure out how to price it.And for a web services (for web hosting), we have seen that a couple times especially in the LBS (location based services) space in some of the RFPs where some of the carriers want to dabble in it before they can invest in it.
We know that's going to be the future and there is nothing that prohibits us technically from doing it at any point in time.What we need are customers that understand exactly what they want and what they are willing to pay for it.You'll drive yourself out of business is you think a hosting solution is going to be a cheap than a solution that you would sell.The value is that the client no longer has to worry about all this stuff.
JF: I see many companies such as SRC, ESRI, or Tactician and other
beginning to offer web services.
MH: We do some in what we offer in the AnySite product, but you know what the issue is - a lot of these application are not real critical to a business and that's why they are willing to outsource them.They are more of a "nice-to-have" but it not core to what they are trying to do for their business.And that's a bit part of what we try to concentrate on, an 80/20 rule; really try to understand business problems and doing things that are of high value.
JF: Thanks for your time and congratulations on a profitable quarter.