Engineering Software Reseller In t...

Engineering Software Reseller

In the early years of computer and software, developer of these technologies sold their results directly to endusers.

However, as these technologies became more advanced and complicated and competing technologies emerged, endusers indigenceed help with the purchasing decision. Firms sprung up to take a bribe for this assistance to end-users. Today, these value added reseller ("VARs") not solely evaluate software and hardware, they also vend these products and provide of that kind value-added services such as: combination of parts to form a wholes setup, integration and upgrades, consulting, training and post-sales support.

Rand is the world's largest value added reseller ("VAR") of software, hardware and services for computer-aided design, manufacturing and engineering (CAD/ CAM/CAE).

Rand's returns are derived principally from the sale of hardware (approximately 45%) software (28%) and services (27%) While these consequences and services may be purchased separately, the majority of returns comes from the sale of a package of software, hardware and related services. These packages are sold to medium and large manufacturers from a broad range of industries (eg cellular phone washing machines, medical equipment, auto parts, etc)

Starting in 1986 from an office in Ontario, the company has grown to have 70 sales offices and customer service middles throughout the world with clients in: Australia, Austria, Belarus, Belgium, Canada, The Czech Republic, England, France, Germany, Italy, Japan, Malaysia, The Netherlands, Poland, Russia, Singapore, Slovakia, Switzerland, Tokyo and the United States. Almost 30 of the company's offices have been lay opened since 1996.

Institutional investors admit approximately 20% of the company's customary shares ("RND", TSE); directors and senior officers be in possession of about 28% and the balance is held at individual investors. The company first sold shares to the public in late 1993

PROSPECT FOR coming GROWTH IN SHARE PRICE

Because long-term germination in share price is driven by the agency of growth in earnings per share, which is driven on growth in revenues, this illustrative thought of Rand's investment potential begins with the inquiry of its historical and brewed revenues. Revenue, earnings and other data for the popular fiscal year ending December 31 1997 have been estimated from interim conclusions

Historical Revenue Growth

As indicated in the accompanying Stock Selection Guide, Rand's rewards grew at an average annual pay with an abatement rate of 67% during the entire subject of attention period; and, at 45% by means of year since 1994. Revenues for fiscal 1997 are throw outed at $250 million - approximately 43 % more than in 1996

Rand's early sprouting stemmed from marketing an expanding line of "Best in Class" software technologies for all stages of the design in consequence of manufacturing cycle. As well, the company expanded geographically in every part North America and now 33 of its 37 North American offices are located in the United States.

By focussing forward designating Best in Class works Rand's product line does not become outdated and technology developer examine to Rand to provide a marketing and hypothesiss integration channel for their productions

In contrast, Rand does not identify Best in Class hardware technology. Rather, the company has provide agreements with the major work-station developer (Digital, Hewlett Packard, IBM, etc) and exchanges hardware as a package with software and value added services.

Rand discloses its markets by penetrating specific geographic areas rather than targeting specific industries. Furthermore, within these areas, Rand targets customers who have a strategic commitment to obtaining the highest possible functionality (spe and accuracy) in the software and hardware they purchase for their mechanical design operations. This functionality allows Rand's customers to contend in their markets on the basis of accelerating the delivery of their effects to their customers.

Customers include: Black & Decker Bombardier, Deere & Co Northern Telecom Eastman Kodak, Whirlpool, Xerox etc

Revenue putting out since 1993 has reflected the continuation of Rand's traditional shooting model as well as acquisitions of a number of European-based VARs and an Asia-based VAR in 1997 Until 1993 virtually all incomes were generated in North America; by means of 1996, approximately half of receiptss were generated in Europe.

Project return Growth

Future revenue sprouting is expected from a continuation of the company's strategy of internal produce and acquisitions in Europe and Asia where markets are large and expose to lower levels of competition.

Historically, germination in Rand's assets 70%, (see Chart 1) has outpaced its reward growth with the result that each $100 of assets is publicly generating only about $200 of returns instead of the somewhat higher $250 at the beginning of the subject of attention period (Chart 2). This situation set forths excess capacity to generate hereafter revenue growth through improved asset utilization.

Despite the asset expansion accompanying income growth, Rand has reduced its reliance in succession borrowed money and currently has virtually no extended term debt. At the beginning of the cogitation period Rand was using about $80 of liability to finance every $100 of acquired assets; now the company uses merely about $40 of debt for each $100 of assets (Chart 3) The availability of unused debit capacity is, in part, befitting to the company's practice of retaining all of its earnings and not paying without dividends (Chart 4). If straited this unused debt capacity can be used to finance time to come asset and revenue growth.