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Agile’s CEO Speaks

 


By Hal Plotkin
CNBC.com Silicon Valley Correspondent

May 24, 2001 03:03 PM

Agile Software Corp. {AGIL} was in the spotlight again this week when the company reported pro forma net losses for its 2001 fiscal fourth quarter that met recently revised analyst expectations. On a pro forma basis, Agile’s losses came in at five cents a share for the final quarter of its fiscal year, on revenue of $26 million.

Agile’s pro forma net loss, however, excludes expenses related to the company’s recently scuttled merger with Ariba Inc. {ARBA}. Counting those and several other categories of excluded expenses, Agile Software lost $1.80 cents a share in the fourth quarter, as compared with an actual $0.31 loss for the same period one-year earlier. Analysts, who often rely on pro forma calculations, had been expecting the company to post a loss of 5 cents a share for the most recent quarter.

Deutsche Banc. Alex Brown and Credit Suisse First Boston cut their forward-looking earnings expectations on Wednesday after the company warned that pro-forma net losses will come in at similar levels for at least the next two quarters. Analysts had expected to see Agile break even over the next two quarters, according to Thomson Financial/First Call. The company now says that won’t happen until the following quarter.

Agile Software currently has more than $300 million in cash on hand and short-term investments, according to its latest balance sheet. The company boasts more than 500 customers, including Agilent Technologies Inc. {A}, Dell Computer Corp. {DELL}, Flextronics International Ltd. {FLEX}, General Electric’s {GE} Medical Systems division, Hewlett-Packard Company {HWP}, and Jabil Circuit Inc. {JBL}.

Agile Software’s CEO Bryan Stolle granted CNBC.com an exclusive interview shortly after Agile released its quarterly results.

CNBC.com
You’ve lowered guidance for the next two quarters but say you expect to see things pick up after that. What gives you confidence you’ll see more growth three quarters out?

Bryan Stolle
I’m not saying we’re looking for a rebound in [our] third quarter. What I’m saying is that we’re getting a grip on where the business is and how much harder we have to work for the business. We’ve made a strategic decision. We ramped up expenses to a certain head count because of the [failed] merger, so we’re carrying a bigger expense hit than we had anticipated. But it would be silly for us to get rid of these people and then hire them back in two or three quarters. We have the cash, we’ve recruited some great people, and we want to keep them.

CNBC.com
Many business-to-business software firms are running into what might be called “cultural issues” with target clients who can be reluctant to change longstanding business processes or relationships. Can Agile fend off those problems?

Bryan Stolle
That’s always there to some extent but it is not a problem for us. We don’t have a lot of software sitting on the shelves of our customers. Our software is focused around helping companies collaborate effectively with their supply chains to pull costs out of a product. So our software gets used up very rapidly, and our customers want more. Virtually every single customer we’ve got, even from five years ago, are still buying more subscriptions [to our] product.

CNBC.com
Your failed merger with Ariba begs the question of whether Agile wants or needs to pursue another merger opportunity, perhaps with a larger or more established firm. Are you considering any such moves?

Bryan Stolle
We will entertain any and all $100 or more cash per share offers. Anything less won’t get much of our attention. We’ve learned a lot. We’ve tried to acquire and we’ve tried to be acquired by other companies. We liked the first much better than the second.

Editors note: Agile’s stock was trading at $20 on Wednesday.

CNBC.com
When Agile went public in August of 1999 there was a lot of talk about how your firm would capitalize on its positioning within the collaborative manufacturing software market to expand its footprint into other areas. But by Wall Street’s usual standards revenues of $87.1 million in fiscal 2001 make Agile a boutique operation. Will Agile stay small? How big do you think you can get – and how fast?

Bryan Stolle
We’ve certainly had those discussions. And I can tell you no one in our leadership is a “steady as she goes … we’ve built a nice business let’s just harvest it,” kind of person. We believe we are managing the supply chain DNA for more than 500 companies now and we believe that is a strategic asset.

CNBC.com
Can you become a billion-dollar company?

Bryan Stolle
We believe we can become a half-billion dollar company in the next three to five years. We might not achieve it. But that’s our goal, and that’s what we intend.

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