Even for established enterprise software companies, the market has been brutal. So, just imagine if -- in this environment -- a company is not well-capitalized.
That's the situation for Verticalnet
Last week, Verticalnet reported its first-quarter results. Revenues increased by 16% to $5.3 million. But losses were $3.2 million, up from $2.2 million in the same period a year ago.
The losses are certainly real -- and troublesome. During the last quarter, the cash balance went from $9.4 million to $6.7 million.
Verticalnet develops software to help companies streamline supply management. For example, the software will help identify, select, and negotiate with top suppliers, as well as manage these relationships going forward. Traditionally, companies have managed these relationships with manual processes, which leads to errors and inefficiencies.
What's more, Verticalnet is deploying its technology on demand, which is what top software companies, like Salesforce.com
Some recent customer wins are a testament to Verticalnet's technology. In March, the company sold supply management solutions to Mittal Steel
Then, yesterday, Verticalnet signed a software deal with Cargill, a $63 billion agricultural company. With rising fuel costs, Cargill believes an automated solution can help alleviate the cost pressures.
Both companies searched the market for solutions. They selected Verticalnet despite the fact that the company is relatively small and low on cash.
Verticalnet's goal is to achieve positive cash flow by the fourth quarter (actually, the company has little choice but to do this). But this is still likely a long-term play, because it is still in what might be called the "first-adopter" stage (for companies adopting products that have not gained widespread appeal). That is, expect fluctuations in the bottom line until Verticalnet builds a more stable client base and revenues become more predictable.
Fool contributor Tom Taulli does not own shares in any company mentioned in this article.