ARINSIDER

Unmatched Insight for Industry Analyst Relations Professionals

 

February 11 2005, Release 4.02

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In this Issue:

AR Insider: Deal Makers & Breakers End-Of-Year 2004 Results: Making Time or Buying it?

The Insider: Vendor Briefings - Managing the Agenda (Part I)

Under the Influence: Big Company AR Part III

AR Insider: Deal Makers & Breakers End-of-Year 2004 Results: Making time or Buying it?

By: William S. Hopkins

Both of the two remaining Deal Maker and Breaker firms reported their end results over the last week. Though both firms showed revenue growth, only one was more profitable. The big story though is in what it looks like for the next year.

Forrester – Making time

Setting a blistering pace, Forrester’s revenues were up over 10% to $135 million and both GAAP and Pro Forma earnings gained significantly. Though they don’t report business unit statistics like Gartner, they indicated that growth in research (as opposed to consulting and events) was strong and should continue unabated next year. In a further optimistic move, Forrester announced its intent to repurchase $50 million of its shares over the next year.

After 2 long years, it looks like the Giga acquisition hangover is wearing off for Forrester. Though an enormous amount of the value of Giga was bled off in the acquisition, the resulting combination looks to be stable and strong. This couldn’t have happened at a better time for Forrester as they face an immediate challenge to plot their way forward in the light of the Gartner/Meta deal.

Gartner - Buying Time

Gartner painted a much bleaker picture. Gartner grew its top line revenues 4% from $856 million to $894 million and earnings were down by half to $0.13/share. On a business unit basis, Research eked out a 3% gain, Consulting was flat, and Events was up 18%. Though these results were lackluster, the most interesting information probably came in the form of their future guidance. Gartner’s freshman CEO Gene Hall predicted very low growth in both top-line revenues (2.5%-5%) and earnings (flat to slightly higher), excluding the effects of the Meta acquisition, expected to close in Q205. These results significantly lag most estimates of overall growth in the tech sector (commonly thought to be a chief indicator of analyst firm prospects).

This bleak forecast may actually be a smart move for Gartner. By setting lower expectations and moving to yearly, rather than quarterly metrics we think that Mr. Hall has effectively bought a year of breathing room for Gartner to assimilate and integrate the Meta acquisition. The good news is that, if true, this indicates a more conservative, mature management perspective for Gartner. The bad news is that given the low forecasts and the impending integration of Meta, it makes 2006 a literally make or break year for Gartner.

The bottom line is that end of year financial performance doesn’t have a lot to do with your day-to-day relationships with analysts and firms. What it does predicate though, are long-term changes to business practices and policies. We believe that what we’ll see over the next year is pretty clear.

Forrester has wherewithal (and the mandate) to grow in the two-player, IT buyer advisory game. This should mean new services and products and more aggressive competition.

Gartner has a much different task. They have just about a year to figure out how to better their results and digest their latest meal – starting with how they are going to keep from alienating those clients that bought Gartner because they had to, but Meta because they wanted to.

Overall, we think the next year should get pretty interesting – stay tuned…

If you have question or comments on the analyst firms, their performance and future prospects, please give us a call at 512.334.5943 or email us at inquiry@knowledgecap.com. We’ll be happy to talk.

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The Insider: Vendor Briefings - Managing the Agenda (Part I of II)

By: Christopher R. Wilder

There is no doubt that buy-side industry analysts (Gartner, Forrester, META, AMR, Ovum, etc.) wield an immense amount of influence over IT purchases. They spend their days studying and analyzing markets and whether correct or not, they are perceived by most to be the experts in their particular domain. With just a few words, the fate of a deal, product or company can be compromised. Some IT vendors believe that an ill prepared or managed analyst briefing contributed to the demise of their product or company.

While there are different types and purposes of interaction with analysts, the one-hour, face-to-face company or product launch briefings tend to be the most challenging for IT vendors.

In Part One of this Two Part series, we examine the first 5 points of Gartner’s “Agenda Outline of a Vendor Briefing” and provide insight on how vendors can frame their presentations to influence the influencers.

Although Gartner developed the outline, the basic framework can be applied to any analyst firm briefing (depending upon the relationship the vendor has with the analyst, and the purpose of the meeting, some of these points can be skipped or rearranged):

1. Company mission: assuming that the analyst is not familiar with the vendor, a brief company overview should be given that concisely answers the following seven questions:

• Who are you?
• What business are you in?
• What people do you serve?
• What are the special needs of the people you serve?
• With whom are you competing?
• What makes you different from those competitors?
• What unique benefit does a client derive from your products or services?

If the analyst is familiar with the vendor, and a relationship has been developed, this overview should be used as a quick refresher.

2. Company background: revenues, number of employees, profitability, number of locations, management team structure, investors, etc.— Analysts spend their days researching, studying, and analyzing companies in their practice area. They have seen a plethora of companies with different technologies, market dynamics, business models, and organizational structures. They will look at the information that is provided to them and what is not and they will make assumptions based upon their experience. This validation process tests the openness and honesty of the vendor. How the vendor approaches this interaction can have a profound impact upon the future relationship with that analyst, and potentially with the analyst firm. The best policy is to be straightforward and relatively open with the numbers you provide.

3. Product or service architecture: What is being sold, and how is it organized? What is the roadmap for future product/service line development? — For many analysts, seeing is believing. Be prepared to show them the technology and/or architecture. Do not go too deep into the details, but have the capabilities to do so if they ask for them. Take advantage of their experience and domain expertise and ask them for their assessment.

4. Competitive landscape: what market is the vendor in, who are the competitors and what is the overall strategy for developing sustainable competitive advantage? — Every vendor has competitors. There are no exceptions. Vendors that claim that they do not have competitors immediately diminish their standing with the analyst. The reality is that the analyst wants to hear the vendor’s assessment of the market that they are in, who they perceive as their competitors, and how they are addressing the competitive forces in the industry for sustainability. Vendor clients should be proactive in asking for the analyst’s assistance in fine-tuning their positioning, strategy, road show presentation, etc.

5. Distribution channel strategy: What is it, how successful has it been by channel, and what are plans for improving/changing the strategy? — The vendor’s distribution channel strategy is a critical point of the briefing. This tells the analyst a good deal about the vendor’s business and sales models, what is working and what is not. The key piece of information that should be included is the percentage of product that is moved through the different channels and why.

In Part 2 we’ll look at the last 5 points:

• Key decisions for the next 6,12,18 months
• Customer references
• Top 3 Investments Vendors need to make
• What keeps your CEO up at night
• Strengths and Weaknesses of your competitors

If you have question or comments on these first 5 points, please give us a call at 512.334.5943 or email us at mailto:inquiry@knowledgecap.com We’ll be happy to talk.

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