What's Next for GXS
Read more: http://www.ec-bp.com/index.php/articles/editors-blog/9993-what-s-next-for-gxs#ixzz2gIa1LLzvReuters' recent commentary about GXS and its o Reuters' recent commentary about GXS and its Owner Francisco Partners LP brings to light something everyone in the supply chain business knows
but conveniently shoves away out of sight. Based on Francisco Partners' intent to spin off the company coupled with GXS' abysmal performance relative to profitability, the giant provider of EDI solutions is in big trouble. As Reuters reports "The company has warned that it may continue to incur losses due to its debt and cannot guarantee that it will report a net profit in the future."
So what are its options? According to its financial reports, GXS is servicing debt of somewhere over $750 million. That's down (but not much) from the initial $800 million that Francisco Partners gathered from its investors back in 2002 when General Electric decided to dump divest itself from the VAN business. Jack Welch is a pretty savvy guy, and since he left GE in 2001 I imagine that one of his parting actions was to get that divestiture underway before he left.Fast forward to 2012 when Francisco Partners' 10 year term on its investors' term expired and it became clear to Francisco that the investment was not turning out the way it had intended. It had to get extensions from its investors and even stopped charging management fees.
All this is actually not good news for the supply chain as a whole. That's because so much of the data traffic that supports commerce traverses at some point, through GXS. This is of course, no surprise to GXS as it takes aim at additional revenue sources by considering charging subscription fees for every cross-connect, or what it describes as "daisy-chaining". No doubt this would increase its income. But it may also hasten the trend to look for other methods and avenues to transact electronic commerce.
What's a company to do when they have one sector of its business that seems to be growing and other sectors that may be worth some amount but are not gaining ground? Since GXS indicates that its managed services revenue shows a growth rate of just over 23% from 2009 through 2012, it may do well to hold on to its managed services as its new core business strategy and sell off its VAN business. IBM may even be interested in consolidating that portion of the industry. Or maybe a company like TrueCommerce or SPS Commerce that relies on GXS' transfer connections would be likely purchasers.
Either way, don't expect to see GXS' finances turn around over the long haul. The managed services business may be growing for now, but their version of managed services relies on single-installation kinds of technology that don't leverage shared services found in more up to date cloud-based services. And it's only a matter of time till factors converge to put an end to the installed software business; even Microsoft has learned that lesson.
All this is actually not good news for the supply chain as a whole. That's because so much of the data traffic that supports commerce traverses at some point, through GXS. This is of course, no surprise to GXS as it takes aim at additional revenue sources by considering charging subscription fees for every cross-connect, or what it describes as "daisy-chaining". No doubt this would increase its income. But it may also hasten the trend to look for other methods and avenues to transact electronic commerce.
What's a company to do when they have one sector of its business that seems to be growing and other sectors that may be worth some amount but are not gaining ground? Since GXS indicates that its managed services revenue shows a growth rate of just over 23% from 2009 through 2012, it may do well to hold on to its managed services as its new core business strategy and sell off its VAN business. IBM may even be interested in consolidating that portion of the industry. Or maybe a company like TrueCommerce or SPS Commerce that relies on GXS' transfer connections would be likely purchasers.
Either way, don't expect to see GXS' finances turn around over the long haul. The managed services business may be growing for now, but their version of managed services relies on single-installation kinds of technology that don't leverage shared services found in more up to date cloud-based services. And it's only a matter of time till factors converge to put an end to the installed software business; even Microsoft has learned that lesson.
What's a company to do when they have one sector of its business that seems to be growing and other sectors that may be worth some amount but are not gaining ground? Since GXS indicates that its managed services revenue shows a growth rate of just over 23% from 2009 through 2012, it may do well to hold on to its managed services as its new core business strategy and sell off its VAN business. IBM may even be interested in consolidating that portion of the industry. Or maybe a company like TrueCommerce or SPS Commerce that relies on GXS' transfer connections would be likely purchasers.
Either way, don't expect to see GXS' finances turn around over the long haul. The managed services business may be growing for now, but their version of managed services relies on single-installation kinds of technology that don't leverage shared services found in more up to date cloud-based services. And it's only a matter of time till factors converge to put an end to the installed software business; even Microsoft has learned that lesson.
Either way, don't expect to see GXS' finances turn around over the long haul. The managed services business may be growing for now, but their version of managed services relies on single-installation kinds of technology that don't leverage shared services found in more up to date cloud-based services. And it's only a matter of time till factors converge to put an end to the installed software business; even Microsoft has learned that lesson.
Read more: http://www.ec-bp.com/index.php/articles/editors-blog/9993-what-s-next-for-gxs#ixzz2gIZjdXn8
So, since the investors seem to be tired of the continuing losses with no turn-around in sight, the only available option is to offer an IPO for GXS. Really? I know the IPO market has been making a bit of a recovery as of late, but seriously, will the price per share find any kind of support with financial prospects admittedly showing negative trends for the foreseeable future?
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