Acxiom Hopes ADN, AbiliTec Prove Worth Dave Marino-Nachison (TMF Braden)
October 26, 1999
Shares of computer-based marketing information services company Acxiom Corp. (Nasdaq: ACXM) lost nearly 30% of their market value this morning despite the company's reporting fiscal second-quarter (ended Sept. 30) earnings of $0.24 per share, up from the year-ago $0.18 pre-charge profit and a penny better than estimates.
What bummed investors out was the company's projection of earnings growth for upcoming fiscal years as it works to ramp up its Acxiom Data Network (ADN) consumer, business, property, and telephone Internet database and its AbiliTec high-speed data interpretation system -- the two accounted for most of the company's new business in Q2 -- as quickly as possible.
"We have decided to try to capture the maximum market share possible over the next few years," said Acxiom Company Leader Charles Morgan. "This will require a significant investment in people and technology. For the next several years, we will be aggressively adding new features and new data content to the Acxiom Data Network and AbiliTec, as well as expanding the products globally."
Those aforementioned investments are expected to be offset by lower costs in other areas. Acxiom cut its workforce by 5% earlier this fall, targeting underperforming employees in a move that surprised some observers given the demand for tech workers. Nevertheless, Morgan expects next year's earnings growth to be in the 15% to 20% range. Wall Street's analysts were looking for 27% year-over-year growth.
The investment period is seen taking between two and two-and-a-half years. The company didn't issue much additional forward financial guidance beyond Morgan's assertions that revenues could increase by more than 25% in coming years, and profit margins could improve significantly from current levels.
Morgan is thinking big: "We believe the potential market for the [ADN] and AbiliTec is ... easily in excess of $10 billion per year within five years." Given that perceived opportunity in light of his company's recent history -- full fiscal year 1999 revenues were about $730 million -- investors might have reason for optimism. But their memories probably still sting when remembering a difficult 1999 that included an August Barron's article calling the company's accounting "frisky" in the face of price competition.
Acxiom's new direction may try investors' patience and stomachs in coming years as the planned investments take their toll on both the income statement and the balance sheet (already bearing a good-sized portion of debt).
Long-term investors, though, might want to watch Acxiom with interest to see whether customers step up and accept ADN and AbiliTec with the same vigor that Morgan uses in describing their potential.
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