Today, we continue our high-growth study with a look at BroadVision (Nasdaq: BVSN), a developer of software applications that enable companies to attract, retain, and leverage relationships with their customers. For example, BroadVision's One-to-One Enterprise application allows companies to build complex e-commerce websites for a personalized customer experience. In addition, self-service applications via the Internet allow customers to handle routine tasks and save money by freeing up customer service resources to handle more complex issues.

The company also develops software applications for the retail and financial markets, business-to-business marketplaces, and personalized portal applications that help users aggregate information from a variety of sources. For example, the One-to-One Financial package enables real-time quotes, account balance information, transaction processing, and personalized content to be created online. This automates tasks and improves the customer experience, which results in lower costs and improved customer satisfaction.

There's no doubt that BroadVision is a high-growth company. Throughout 2000, BroadVision grew its revenue by 258% to $414 million, compared with revenue of $367 million for Vignette (Nasdaq: VIGN) and $163 million for Art Technology Group (Nasdaq: ARTG), BroadVision's two closest competitors. Based on management's estimate for growth in 2001, BroadVision's revenues should be up between 45%-52%. The company also sports a gross profit margin of nearly 70% and an operating profit margin approaching 11%. That's the goods news.

The bad news is that the stock is more than 90% off its 52-week high and BroadVision's last quarter was sloppy. The company experienced growing pains, a common practice among companies growing rapidly in a short period of time. While one quarter does not make a trend, it is worth noting. In an effort to staff up in anticipation of further growth, BroadVision hired more employees and its expenses spiraled out of control. The $11 million in unplanned expenses caused BroadVision to miss its quarterly estimate of $0.05 per share by $0.03. Poor expense controls are a sloppy practice and investors' patience is being tested. It will be vital for BroadVision's management to execute its business plan effectively over the next few quarters to restore investor confidence.

There is also a perception among Wall Street analysts that BroadVision's technology is lagging. CEO Pehong Chen dispelled this belief in the Fool's StockTalk interview with him back in December. BroadVision continues to be an innovator and may have a significant advantage in its space.

The BroadVision advantage
BroadVision's value proposition to its customers centers around the concept of "buy" versus "build." A potential customer can "buy" the solution directly from BroadVision or "build" it on its own by buying products from BroadVision's competitors or developing its own tools internally. Each value proposition has its advantages. Some companies may decide to build their own applications to create more flexibility and a customized solution to fit their needs. Other companies may decide to buy the solution to reduce costs and improve the time-to-market of their offering. Many leading companies -- such as General Electric (NYSE: GE) and Home Depot (NYSE: HD), along with nearly 600 other "live" customers -- have chosen to do business with BroadVision and realize the value of buying a solution.

Economic doldrums looming
As companies tighten their belts due to the slowing economy, some software vendors may be hit very hard with slowing sales. However, I think that Internet Relationship Management (IRM) vendors like BroadVision will do reasonably well. Companies will still spend money on technology that improves the relationships with their customers and cuts costs, especially in a weak economy.

I think the IRM "winner" will likely emerge from this period of economic uncertainty because potential buyers of IRM software will go with the "safe buy" -- that is, the vendor most likely to survive. Technology buyers are conservative and the last thing they want to do is buy a product from a vendor that will not be around a year from now to support its purchase and provide upgrades. So, technology buyers will flock to the safest company causing it to garner significant market share gains.

In my opinion, BroadVision is well-positioned to benefit from this period of economic woes. With $223 million in cash on its balance sheet, positive cash flow, and minimal debt, the company is sufficiently funded to grow its business without seeking other sources of funds. In addition, Pehong Chen is highly regarded as a visionary and business leader, and other business leaders -- the CEOs writing the check for this software -- are likely to view his company as the safe buy.

Now what?
This thumbnail sketch of BroadVision's business begs the question of whether it is suited for long-term Drip investors? I will answer my own question with a resounding "No!" As a first-mover and top dog in an important, emerging industry, BroadVision possesses the characteristics of a Rule Breaker rather than a Drip-type stock.

While software companies have attractive business models, their competitive advantage periods are relatively short. Technologies evolve rapidly and today's leader can quickly become tomorrow's loser. The pace of technological evolution will intensify as the world becomes more interconnected and information transcends geographic borders more easily.

This does not mean that BroadVision is a bad stock or a bad company. The potential for this company and its competitors is tremendous. However, it is almost impossible to look out beyond a couple of years -- let alone 10 years or more -- and know what the marketplace will look like and whom the leaders will likely be.

John Del Vecchio is notorious for his bad timing. At the time of this writing, he owned shares of BroadVision. To see his holdings, visit his profile. The Motley Fool is investors writing for investors.