Doom and Bloom?
The economy is going to hell, dot-coms are dying, pink slips are flying, teen-age millionaires are again penniless, and Cisco Systems no longer looks invincible.
But amid the chaos, a number of companies are finding innovative ways to use the Internet and increase profits. At the risk of being inundated with other examples of profitable business models, we present a sampling of companies that may not make the daily headlines, but are pleasing investors with their Net initiatives.
Who Are You?
Avert, which provides background checks over the Internet, recently increased its special annual dividend by 67 percent. It also announced a merger and appears to be continuing a profitability streak that stretches back a decade. It earns the right to be included among five companies prospering by using the Internet.
Averts customers are small and midsized companies without the staff to do complete background checks on job applicants. Automated Data Processing is a marketing partner that sells payroll processing services and offers Averts checks as a service.
Averts researchers check local court, workers compensation, motor vehicle and other records, most of which are not online, to verify applicants information. Avert also provides customized online application forms that job seekers can fill out.
The Fort Collins, Colo., company stores information about the people it checks, but Avert is not a database supplier, says Dean Suposs, founder and president. "We always go out and get fresh information," he says.
Revenue grew from $4.7 million in 1994 to $17.9 million in 2000 while net profits tripled from $970,000 to $2.7 million. Avert is buying Advantage Assessment, a developer of employee assessment technology, to keep that record intact.
Cheap tickets has done something the better-known Priceline.com could not -- avoided financial burnout.
In April, the Honolulu company reported its ninth consecutive quarter of profits. Revenue was up 17 percent to $24.9 million while net income, at $1.2 million, was down from $2.3 million a year earlier. That was still ahead of analysts estimates. Internet sales account for 40 percent of total business, up from 38 percent a year ago. Cheap Tickets also has 12 retail outlets and a 1-800 sales program.
The company estimates that gross bookings will be up 25 percent to 30 percent this year and gross margins will improve by 1 percent or 1.5 percent. Revenue is expected to rise 18 percent to 23 percent.
Catching a big wave back to the mainland, Investment Technology Group of New York supplies equity trading services to institutional investors and broker dealers, and has not suffered from the down market.
The 1999 spin-off from Jeffries Group offers its Portfolio System for Institutional Trading (Posit), an online application that lets large investors match buy or sell orders eight times per day. It allows large investors to tailor their trades, such as by putting entire lists of stocks up for sale, instead of just one equity. The system is anonymous to minimize the impact on the market and conceal an investors strategy.
Browser access to Posit was introduced last year and new analytical tools have been Web-enabled from the start, says Mark Wright, chief information officer. That has made it easier to deploy them internationally and won ready acceptance from investors who want to see at anytime, from anywhere, the impacts of their trades, Wright says.
ITG continues to sail along. First-quarter profits were up 32 percent to $21 million on a 21 percent increase in revenue to $91.7 million. Between 1996 and 2001, revenue almost tripled to $310 million and profits soared from $41 million to $113 million.
Banking On the Net
Online banking has not been a big hit with consumers, but NetBank recently turned in its 12th consecutive profitable quarter. Operating income jumped to $797,000 from $101,000 a year ago. Net income was $797,000. Accounts more than doubled to 200,000 from 82,000, and 80 percent of those are checking and money market accounts. These have lower attrition rates, and with clients visiting the Web site several times per week, NetBank has more chances to cross-sell additional services.
NetBank attributes its success to affinity marketing partnerships and targeted online advertising. Loans make up 70 percent of NetBanks $2 billion in assets; more than 80 percent of the loans are for single-family residences.
OneSource Information Services Business Browser is a portal for information about companies, industries and markets for businesspeople. In April, OneSource reported its third consecutive profitable quarter on a 25 percent rise in revenue to $14.5 million and a seven-point improvement in gross margins. Net income was $600,000.
Some dot-com customers have fallen by the wayside, but the number of customers has increased to 859 from 667 a year ago, says Dan Schimmel, president and CEO. They are also signing larger and longer contracts for OneSources services. Siebel Systems packages OneSources product with its own in many sales, he says.
Roy Landon, chief financial officer, says second-quarter revenue is estimated at $15.3 million to $15.7 million, and earnings per share will likely come in at 7 cents or 8 cents, excluding noncash charges. For the year revenue should be $63 million to $66 million and earnings between 40 cents and 43 cents.