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Project E-Storm. 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
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Operation E-StormExecutive 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
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 - 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 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 - 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 Operation E-Storm Mission, Goals & Objectives Hurricane Tornado Similar Mission and Strategy!
Operation E-Storm Markets & Customers Hurricane Tornado • Geographical Presence - Number of Employees or Distributors USA 860 emp, Y- distr. 45 emp.; Y - distr. Canada 5-10 emp, Y- distr. 400 - 450 emp;Y - distr. Rest of the Americas 10-15 emp, Y- distr. none Europe 150 emp, Y-distr. none Asia 0 emp, Y- distr. None • Vertical Industry Currently Served (Y/N) Automotive Y Y Banking & Financial Services N Y Construction N Y Government Y Y Oil & Gas Y N Retail/Consumer Goods Y N Sports & Leisure N Y Telecom & Utilities Y Y Trade & Transportation Y Y • Customer Segments Served (no of customers) large (greater than $500M in sales) 5% 1%-2% medium (less than $500M, greater than $50M) 20% 8%-9% small (less than $50M) 75% 90% Synergistic Geographic Markets, Industry Verticals & Customer Segments!
Operation E-Storm Products Hurricane Tornado • Traditional E-Commerce - Product List PC Trusted Link Commerce EdiKIt STX Mid-Range EDI/400 ECXpert Mainframe STX/MainFrame MessageWay Network Network, Net Access, AIBN, BEBN, Web Dev Web Hosting, Web TotalNet, Web Hosting, Serving, IVAS, INP, Advantage Internet, ANX, Templar BuyWay • Emerging E-Commerce - Product List Order Management Trusted Link Procurement, Outsourcing @Commerce Logistics TrackPro Internet-Enabled Ecommere Express, @Commerce Templar • Security - Product List Firewalls & VPNs PrimeFactors Certificates OnWatch • Payments & Processing - Product List Bill Payment CAN-ACT Bill Presentment Bell Direct Bill Processing Significant Product Rationalization Synergies!
Operation E-Storm 1998(E) Financials Hurricane* Tornado Dollars in Millions ($US) Revenue Software $52 $ 6 Software Maintenance -- recurring $24 Network Services -- recurring $36 $45 Professional Services $25 Other $ 5 $25 Total $142 $76 Gross Profit (Gross Margin %) 72% 30% - 40% Operating Profit (Operating Margin%) 17% negative Customers 45,000+ Employees 1,000+ 400 - 500 (adjusted for Bell resources) *Source: CIBC Oppenheimer Efficiency Ratios Revenue per employee $150,000 $170,000 Sales & Marketing % of Sales 20.2% >35% Product Development % of Sales 8.8% >12% G&A % of Sales 16.6% >25% Gross Margin Breakdown Software % 91.0% Services% 62.3% Network Infrastructure Sourced from Sprint Sourced from Earthquake Economy of Scale and Operating Efficiency Synergies Exist!
