甲骨文 (ORCL) 2004 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the SeeBeyond actual third-quarter results conference call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

Please note this conference is being recorded.

I would now like to turn the call over to Ms. Andrea Williams, VP Investor Relations.

Ms. Williams, you may begin.

Thank you, operator.

Good afternoon, everyone, and thank you for participating in SeeBeyond's third quarter 2004 earnings conference call.

With us today are Jim Demetriades, CEO of SeeBeyond;

Carv Moore, President and COO; and Barry Plaga, EVP and Chief Financial Officer.

Following management's comments we will open up the call to any questions.

Now I would like to read the Safe Harbor disclaimer and other securities law related statements.

The following conference call includes statements that are not historical in nature and as such are intended to be forward-looking statements.

For purposes of the Safe Harbor provided by the Securities Litigation Reform Act.

These statements, including those related to estimated revenue and earnings per share for the fourth quarter of 2004, and full-year 2005, the expected level of future customer demand, the expected areas of management focus, including the drive for operational effectiveness in North America and Asia-Pacific, expected headcount levels, future DSO levels, future service revenue levels, expectations regarding our collaboration with Sun, and the expectations of future growth in SeeBeyond's business including growth related to specific products and market segments, these are all statements based on SeeBeyond's current expectations, assumptions, estimates and projections.

Its industry and its future prospects.

The Company would like to remind you that these statements are predictions, and that actual events and results may differ materially from those forward-looking statements based on certain risks including market acceptance of our products and services, risks relating to customer adoption of and sale of efforts behind the SeeBeyond ICAN 5 Suite.

The discretionary decision to release new versions of existing SeeBeyond products, release of competitive products, and changes in the mix of products and service revenue.

Delay, and or cancelation of large transactions, among other factors.

The forward-looking statements contained herein and earnings -- today's earnings release and also conference call are subject to other risks and uncertainties, including those most fully described in the Company's filings with the SEC, including its annual report filed on Form 10-K for the year ended December 31, 2003 and its quarterly reports on Form 10-Q.

The Company does not undertake to update any forward-looking statements.

Please note, as well, on this call we will discuss historical financial and other statistical information regarding our business and operations.

Some of this information is included in today's press release, which we have posted on our Website and furnished to the SEC on Form 8-K.

The remainder -- the remainder of this information will be available on our Website by accessing a replay of this call.

Now I'd like to turn the call over to Carv Moore.

Thank you Andrea and welcome everyone to our third quarter 2004 earnings conference call.

I'd like to begin by sharing with you a few of the key highlights from the quarter.

For the third quarter 2004, we reported total revenue of 41.7 million, a 29% improvement over the same period last year.

We also reported GAAP earnings of 1 cent per share in the third quarter versus a loss of 6 cents per share in the same period last year.

Expense management and profitability are a key focus area of our operational oversight.

Even more significant was the license revenue we reported for the third quarter of 2004 of 17.9 million, which is a 60% increase over the prior year's third quarter.

And we ended the quarter with approximately 68.1 million in cash or approximately 80 cents per share and DSO of 76 days.

Overall, we are pleased with our performance for the third quarter and are continuing to drive progress in key areas such as, one, North America sales execution, as evidenced by great new customer wins at Borders, Dunn and Brad Street, St. Paul Travelers, Phoenix Wealth management, and Pegasus Solutions.

Two a renewed focus on strategic alliances development.

Three, customer adoption of ICAN 5, which debuted a year ago and four, composite application development with our existing customer base.

We closed 75 deals in third quarter, bringing our total customer base to nearly 1,950.

The largest installed base in the pure play integration space.

With marked success across key verticals including financial services, health care, manufacturing and retail, the following customers represent new and existing business during the quarter: BMW Group, BNP Paribas, Borders Group, Dunn and Bradstreet, EDS, Emerson, Haworth, Hertz Corporation, Nestle, United Kingdom's National Health Service.

ORIX Australia, Pegasus Solutions, Phoenix Wealth Management, Societe Generale, St. Paul Travelers, State of South Dakota, Sutter Health and U.S.

Oncology Incorporated.

Several of our notable wins included Phoenix Wealth Management, which was a significant financial services win in Q3.

This customer needed a Web services solutions for several key initiatives in the year ahead.

SeeBeyond competed against IBM and WebMethods head to head in this deal and the SeeBeyond team succeeded through successful partnering with Deloitte in being able to articulate key differentiations in business process managing, business activity monitoring, and composite application development.

All on one integrated organic platform.

To round out a tremendous quarter for financial services were great wins at Societe Generale and also at Goldman Sachs.

Both at these wins are at the expense of our traditional competitors, WebMethods, and Tibco, our overwhelmingly convincing depth of experience with swift protocalls in Europe as well as excellent referenceable customer based asset managers overseas were the key differentiators for us.

Thanks to all the teams around the world that helped us bring these deals across the finish line in Q3.

Overall, North America sales execution is continuing to improve with North America license performance stabilizing in the last six months, we need to continue a growth trend in North America, and will continue to bring additional reps on line in that region.

We still have work to do, and -- to have a greater percentage of our reps hitting quota in North America but we are making good progress thus far.

To close, overall, we are pleased with our Q3 products and believe that we can continue to improve in the specific areas, that we have outlined for you over the last three quarters.

We remain focused on controlling costs, improving sales force effectiveness and ensuring customer success with ICAN 5.

My attention remains on focusing improved alliance relationships and our continuing to drive operational effectiveness in North America and Asia-Pacifics as the teams continue to mature.

Now I'd like to turn the call over to Jim Demetriades, our CEO and founder for some more color on the overall environment and our position in the marketplace.

Thank you, Carv.

As I shared with you all last quarter, we are beginning to see a dramatic shift in the needs and priorities of our customer base.

A recent study of nearly 500 enterprise buyers by the Yankee Group of Boston revealed that in the next 12 months, 75% of those organizations plan on investing in the technology and staffing necessary to enable a service oriented architecture.

We are seeing this in our own customer base and are witnessing a fundamental shift from database centric applications to composite applications that leverage an integrated service oriented architecture, which is a perfect fit for the capabilities of SeeBeyond's technology.

The next generation of this technology is here and it's centered around reusability and lowering total cost of ownership through the development of service oriented based composite applications.

So recent research published by leading European analysts for most of the Butler group has shown that organizations using SeeBeyond ICAN 5 platform can save over 80% in the time spent building and developing composite applications.

We see ICAN 5 as the future of software today and I think that some of the most dramatic examples of this can be seen from a very new and interesting business opportunities that we won in the last 90 days.

St. Paul Travelers is a good example of one of these wins.

This is a $22 billion revenue insurer, which was faced with a challenge of having a large variety of Legacy systems that were not very flexible.

SeeBeyond will be using and deploying a service oriented architecture in the travelers insurance business environment.

This was a very long and complex proof of concept that lasted about six months, where we had to prove that Legacy systems can become part of a service-oriented architecture.

And we are literally able to on the mainframe integrate all the services that travelers has already built, Cobalt Code, for example, and make that speak J2EE.

So this is a very significant development and I think it's illustrative of the types of major corporations that are looking to SeeBeyond to provide global service-oriented architectures.

Basically what we're going to enable travelers to do is easily orchestrate business processes using these services, they claim that no other vendor had anything like SeeBeyond, and the only main competition that made it to the final stage was IBM.

And IBM failed, once again, to deliver one of the world's largest companies this type of technology.

We also I think have a very interesting and exciting success story at Pegasus Solutions.

Pegasus has evolved to become the critical technology backbone of the entire hotel industry powering the majority of hotel reservations around the world.

They had been using Web methods for integration, and internal development.

However, they decided to switch over to SeeBeyond and is one of a couple of companies that decided to do that, including Societe Generale.

Key differentiators for SeeBeyond in this deal included our architecture, our high availability, our centralized management of a distributed environment and most importantly ICAN 5s ability to develop composite aps.

Now, Pegasus really chose us for three real strategic initiatives.

One is for our business process re-engineering and human workflow re-engineering so that they could automate the way information flowed across the dozens of systems within their own IT organization and to and from all the hotels throughout the world.

So they are creating an automated view of how these transactions when you make a reservation will flow throughout all of the hotels and their systems.

And a second component had to do with internal integration.

They wanted to integrate the dozens of acquisitions and IT systems that they've basically acquired over the last several years.

They wanted to make them all work together seamlessly.

So we're doing that part of the integration within the organization.

But the services built throughout the business process in A to A integration are going to plug and play right into a new generation of applications that they want to provide their customers.

These new composite applications.

So these combinations of needs, the A to A needs, the B to B needs, the BPM and human workflow needs, all together have given us the ability to create a true strategic solution for this account.

We're very excited about what they're going to be doing with SeeBeyond's technology over the coming years.

All of this success with our new customers and our vision for composite applications has won us some very exciting new friends and partnerships and I'd like to touch on the partner front and highlight an extremely exciting and I think important partnership which we announced a week or so ago with Sun Microsystems.

This is the first announcement of a growing relationship with Sun.

As the only J2EE certified pure play integration vendor, we announced collaboration, co-marketing and a bundled software offering in two areas: Portal and RFID.

With this agreement, we will pour components of our technology, the ICAN 5 platform, to the Sun Java enterprise system, starting with the eGate integrator to the Sun Java system application server 8.

Sun believes that it can significantly increase its portal opportunity in the near term now that it bundles integration and business process management capabilities from SeeBeyond.

We're focusing on two initiatives at the beginning here, right.

We're focusing on the RFID initiative, which we think is also a new and very large opportunity, and the portal initiative.

I think that what's exciting about this is the hundreds of existing Sun portal and ap server customers will gain access to SeeBeyond's technology.

And Sun expects to double the number of sales that it has of its core technology around portal and other capabilities and requirements because of this partnership.

They did not offer A to A or B to B or business process management or human workflow or ETO bundled into their offering and solutions today as part of their stack while other competitors in the application server space did.

We now offer that capability and I think that this is a tremendous endorsement of SeeBeyond as I think everybody will agree Sun is a technology leader and is a technology visionary.

SeeBeyond has been picked amongst all the players of integration in the world to become a strategic partner of Sun's.

So I think that Sun described it best probably at our users' group last week when they talked about this being a partnership that delivers the most productive SOA and composite application development and deployment environment in the world.

We could not agree more and we look forward to updating you on the progress of our joint product development and new customer acquisitions with Sun in the quarters ahead.

So now let me turn the call over to Barry Plaga, our CFO, who will update you on the third-quarter financial metrics, Barry.

Thanks, Jim.

Today I'm going to cover our operating results for the third quarter of 2004.

Then I'm going to follow up with a discussion of our forward-looking guidance.

We reported total third-quarter revenue of $41.7 million, total revenue increased 29% year-over-year from 32.4 million in the third quarter of 2003.

Total license revenue for Q3 increased 60% year-over-year to $17.9 million.

For the third quarter, license revenue represented 43% of total revenue, with services revenue at 24%, and maintenance revenues representing 33%.

International revenue represented 43% during Q3, with Europe representing 38% of total and Asia-Pacific 5%.

Our top-three license revenue verticals for Q3 were healthcare at 22%, manufacturing at 21%, and financial services also at 21%.

Our other important sectors and verticals includes government at 15%, retail, 4%; energy and utilities at around 1%, and then our other category, which included our Pegasus deal, was at 16%.

During Q3 we booked four seven-figure license deals and we had no transaction that by itself represented 10% or more of total revenue in Q3.

In terms of partners, -- partner metrics during Q3 our strategic partners influenced approximately 47% of total revenue, or excuse me, in total license revenue with EDS, Deloitte and Accenture as our top partners during Q3.

Repeat business, in Q3, which is license revenue from pre-existing customers was 46%.

Services revenue for the third quarter was 10.1 million, up from 9.1 million in Q2.

Overall gross profit for Q3 was 74%, flat from the second quarter, and for Q3 '04, services and maintenance margin was 55%, up from 52% in the June quarter.

Total operating expenses in Q3 were 29.2 million, down from 30.0 million in the second quarter.

R&D expense increased slightly in Q3 to 9.7 million from 9.6 million in Q2.

Sales and marketing expense decreased during Q3 from 16.1 million to 14.6 million in Q3 and G&A expense increased to 4.9 million in Q3 from 4.2 million in Q2, primarily due to Sarbanes-Oxley compliance costs and some other G&A items.

On a GAAP basis, net income for the quarter ended September 30, was 1.3 million, or 1 cent per share versus a loss of 4.8 million or 6 cents per share loss in the prior year's period.

At September 30, we had 84.7 million shares outstanding and 87.8 million shares were used in the calculation of diluted earnings per share.

Now looking at the balance sheet, total cash and cash equivalents at the end of the quarter were 68.7 million, 68.1 million, as of the end of the quarter, total cash increased in Q3 by approximately 3.2 million, and cash flow from operations generated during the quarter totaled 6.3 million.

In addition, during Q3 these numbers are net of 2 million in cash which was used to purchase approximately 644,000 shares of SeeBeyond common stock in the open market during the quarter.

Accounts receivable were 34.5 million, as of September 30, and our DSO at the end of the quarter was 76 days versus 74 days at the end of Q2.

Deferred revenues increased by approximately 1.9 million during Q3 to 32 million at the end of the quarter.

Now I'd like to discuss guidance.

I'd also like to remind you that this guidance is forward-looking information and is subject to risks and uncertainties, including those identified in our SEC filings and those mentioned during this call.

We remain optimistic about our prospects for the remainder of 2004.

And looking at Q4 guidance, we need to take many factors into consideration.

First, the continued ramp of our sales force.

Second, the growth in our pipeline of new customer opportunities in all regions of the world, which is to a degree dependent upon the success of our newly invigorated partnership channel, and, third, the risks associated with large transaction sizes.

For Q4, we expect total revenue to be in the range of approximately 41 to 44 million.

On the expense side, we expect expenses to increase in Q4 from Q3 as a result of sales accelerators and marketing costs related to our annual user conference, which was held last week.

Accordingly, we expect GAAP earnings per share to be in the range of 0 cents or break-even to 2 cents for the fourth quarter of 2004.

Throughout the year we've really focused on controlling expenses and this is going to show in the dramatic reduction in our loss for the year we've been shooting for potential break-even for the entire year in 2004.

With that -- with that, I'd like to open the call now to questions.

Thank you.

We will now begin the question-and-answer session.

If you have a question, you'll need to push star, then one on your touchtone phone.

If you wish to be removed from the queue, please press the pound sign or the hash key.

If you are using a speakerphone, you may need to pick up the handset first.

Once again, if there are any questions, please press star, then one on your touch-tone phone.

Thank you.

Our first question comes from David Rudow from Piper Jaffray.

Please go ahead.

Sir, if you're on a speakerphone, please pick up your handset.

I'm here.

Sorry, afternoon, how are you doing?

Hi David.

In terms of the Sun relationship.

When do you expect revenues to begin to flow from that?

My understanding is Portal will come first and RFID sometime later as you develop that r together?

Yeah, that's our -- you know, basic premise right now, is we're gonna -- you know, work on those Ports and work on those composite applications together.

I would say that, you know, the very near term like, you know, one or two quarter out revenue opportunity is, very limited on that front, as that, you know, relationship builds.

However, you know, on top of that relationship and looking at overall deal opportunities we are starting to get some early leads and opportunities around the world as a result of the Sun relationship, so our sales forces are already starting to work together.

And I believe that, you know, the RFID, you know, will come -- you know, probably in 12 to 18 months, you know, 9 to 18 months as that revenue opportunity in Portal is a little more imminent than that in that they are already shipping their own Portal products and we hope to augment those very quickly here.

And then with the relationship, does that lock you out of doing similar deals with other vendors out there in the ap server space?

Yeah, this is Jim.

And the answer's no.

It does not.

At Travelers, for example, we had a demonstrate running on the IBM application server stack.

So -- so we are already supportive of a couple of ap server stacks.

But what this opportunity with Sun does, is it gives us a distribution channel where one of the three largest, you know, server companies in the world has decided to really partner very closely with SeeBeyond.

And we did not have that distribution mechanism again, so their hundred thousand plus customers now have access to and their sales organization has access to and gets paid on bringing this type of business into Sun and SeeBeyond.

And then when -- when a -- when Sun sells something, you guys would then collect the maintenance on that as well, and maybe professional services, too, right?

That's correct.

There could be a maintenance component, there -- services component, a training component, most importantly, a license component.

There is a license component to it?

Absolutely, potentially there is a license component.

Okay, okay.

Excellent.

And then how are customers receiving the SOA message when you go out there and sell to them?

I think that from my perspective, and Carv you might want to jump in here, too.

The message is being received loud and clear, that this is the future of how software itself will be built.

Companies like Travelers or Pegasus take some time to -- to really look at this because it's something they've never seen before where you take their Legacy environments and make them services.

You take their current environments and -- or new environments and make them become services and then you orchestrate the way all these services work together in a business processing, and using a business processor human workflow and I think it's indicative of again, the types of companies that we are signing, that this is striking a certain chord in the marketplace.

I mean when Dunn and Bradstreet, the world's largest company in its industry, Travelers, one of the world's largest insurance companies in its industry.

When the Pegasus, the worlds largest company in the hotel reservation industry.

And quite a few others, that were, you know, Fortune 5 and a dozen different verticals that select SeeBeyond, pick us it's because of our demonstrated capabilities in this particular area.

And I think they're starting small is what we're seeing.

A lot of them are hesitant to go spend 5, 6 million on deploying this right up-front.

But once they start to roll this out, there's tremendous revenue potential in these accounts going forward, meaning generally these are not unlimited all-you-can-eat deployments forever, like other companies have to sell.

These are very limited deployments and there's lots of future revenue opportunity at these accounts.

If you look at a Travelers for them to standardize on CBN across the entire enterprise, how long would it take to roll out that type of a relationship?

I think Carv, you want to jump in there?

I think that's a, you know, it's a good question but I think really more importantly it's, we are now having the opportunity to collaborate with a company like Travelers on this level for this type of relationship.

It's obviously a very complex enterprise and organization and, you know, we fully expect to have a long-term relationship as we go down this path in their various business units.

Another good example is Emerson.

Emerson Electric again is standardized on us this last quarter globally.

A very big company.

And what they're planning on doing is rolling this out over the course of years.

Their first project's almost to a T by the way are expected to be live and in production in three to six months.

But, these are just the first rounds of connections and do not represent ultimately what they think.

You know, we're talking about some of these companies like Emerson and Pegasus literally having thousands of connections that they will need to create using a service oriented architecture and we have and I think as far as I know we're one of the only Companies, if not the only Company in the world that's, you know, expecting to handle 60 or 70 billion transactions at a single customer per year.

And, you know, these are in some cases multiyear deployments and in some cases will be multimonth deployments, but they won't, you know, be deployments that take, you know, five years to get into production.

All of these sites will have things in production in 90 to 180 days.

Okay.

And then for guidance, Barry, on Q4?

What are your assumptions?

I know you talked about the sales force.

What are your overall assumptions on IT spending in Q4?

We're -- you know, we're optimistic that it's gonna, you know, remain as healthy as it has been and hopefully improve a bit here in the Q4.

We're not hearing any, you know, leading indicators of that flushing sound, you know, in terms of, you know, budget, year-end budget spends.

But it's still only October and usually you start getting that in -- in November and things tend to close in early December.

So I don't think it'll be as robust as it was last year because it was pretty healthy but I'm -- you know, we think there is some potential for some of that to fall in this quarter.

And then finally just a -- another question on the accrued expenses jumped up by, what, 2 million?

Yeah.

I think that's seasonal, you know, commissions and, you know, bonus programs and things like that.

Okay.

Great.

Thank you.

Thank you.

Once again, if you have any questions or comments, please press star, then one on your touch-tone phone.

Thank you.

Our question comes from Ian Murray from NOM LLC.

Please go ahead.

Hi.

I'd like to follow up on the guidance.

Barry, I -- could you go over again what your thinking is behind it?

As I look over your fourth quarter sequential license revenue growth over the last four years, it's 56%,14, 38, and 82%.

And here you're essentially talking about flat.

Now, given the restructuring of the sales force and -- and all the positive changes that have taken place, I'm wondering why we shouldn't be expecting something a little bit better than what you've guided to, and then I'll follow up.

Yeah.

I think, you know, if you look at, you know, last year's Q3 to Q4 jump was pretty marked and pretty significant and that was due to the launch of ICAN 5.0 in that fourth quarter so that saw pretty good increase due to, you know, some pent-up demand.

I think we've got a few things to look at here when we look at, you know, what our guidance should be for Q4, you know, I think our primary, you know, goal and objective when we set out this year was to really focus on profitability and controlling expenses.

We've done a very good job of that.

I think we're, you know, ahead of the expense plan this year, maybe perhaps at the risk of, you know, not growing the sales force as fast as we should have.

So that's had an impact I'd say on the -- you know, the North American sales force is growing and being as ramped as we want it on the growth of the pipeline, etc.

Overall, though, we've seen a significant and dramatic increase in the overall sales price of our products as 5.0s come out.

I think without ICAN 5.0 we wouldn't be seeing, you know, a sequential quarterly increase in our ASPs that we've seen over the last four quarters.

But overall, we've -- I think our overall guiding principle here is to remain conservative, focus on cost control, and grow license revenue while, you know, controlling costs and also trying to somewhat grow the sales force.

So that's a long way of saying now that we've got, you know, a big focus on, you know, what the risk factors are for Q4.

We want to be conservative here as we enter the quarter because it's -- it does feel different than it did last year in terms of, you know, that budget flush phenomena that's been happening over the last few years.

I think budgets got spent a little more evenly over the year this year than they were last year.

And, you know, we're just not trying to put our -- our growth rate out there on the limb here this late in the year.

We want to close out with a -- with a good, -- good momentum and really focus in on, you know, some good new customer names, our overall deal sizes, you know, focusing on that continuing to grow and, you know, finishing the quarter -- finishing the quarter profitably and, you know, trying to hit that metric for the, you know, the whole year.

So it's based on what the pipeline looks like now as well as the overall IT spending environment?

They all work together, I think.

And they -- on the cost side --

We do have a number of new reps that we brought on board and, you know, we don't like to -- we don't like to put the rope around their neck yet.

Right.

What was the ASP last quarter?

I missed that.

We didn't talk about it but -- yet but it's -- you know, it was over our 500,000, which we've been getting to the stronger part -- part of our 4 to 5 hundred K range and we broke through that this past quarter in our -- in our commercial business.

That's a big -- I think a big growth factor for us.

I think, you know, a year ago or five quarters ago, you know, it was under 300,000, so it's doubled.

Let me just -- this is Jim.

Let me just emphasize one thing I think Carv's mentioned earlier on the call and certainly Barry and I both have talked about.

Which is our emphasis around profitability.

I think, you know, 20 or 30% growth in a year is a good number to target and achieve in this business climate.

I think it's pretty rare that other companies are achieving that organically.

And, the second most-important component is one of profitability.

I think, you know, I'd rather see us have a very highly productive and smaller sales organization because that's much more accretive to our EPS, than, you know, to invest ahead of the curve.

So I think we're really focused on that.

And just increasing our margin growth.

I mean, I'd like to see a double-digit evolution to have our margin growth and I think that's something that, you know, we just have to keep an eye on our expenses to make sure that that is going to happen one way or another.

Yeah.

Now, you've done a very good job on expenses when I look at what the expectation was.

For the sales and marketing Q4, what -- the user group, should I assume that's a million dollars increase for the whole --

We're very frugal here.

Probably be about $500,000 as an increase in that line item.

Okay.

And the G&A kicked up a bit, is that Sarbanes-Oxley-type-related stuff.

Yeah.

And that should be alleviated here in the fourth quarter somewhat.

So that might come down a bit.

Yeah.

Okay.

Excellent.

Nice quarter.

Thanks, Ian.

Thanks.

Thank you.

Our next question comes from John Difucci from Bear Stearns.

Please go ahead.

Yes, thanks.

My question has to do with competition in the ICAN suite and how that -- that's playing into the market.

Jim, I think you mentioned both IBM and WebMethods.

But now you go out with your suite of products, which I guess IBM has it all.

And the others, WebMethods and Tibco have sort of a similar but a different approach.

I'm just curious, who -- are you seeing other than IBM anyone any more or any less and, with the ICAN Suite, what product areas do you lead with?

Like, what are the areas that really get you in the door?

Carv, you want to talk a little bit about competitive front?

Yeah, I think, you know, across -- across all industries, you know, the competitor is IBM.

I mean, that's who we're in the finals with on just about every deal.

And then depending on industries, obviously we're running into Tibco or Web and then really beyond that we don't -- we don't run into a lot of the other vendors.

I mean, we're seeing obviously SAP out there, particularly in Europe.

But we have a very good track record of wins against SAP in Europe.

And we -- we, you know, a couple times a quarter we'll see Microsoft typically early on in an evaluation cycle.

Carv, is SAP, are they going after deals outside of the SAP Suite at this point with Net Weaver.

Not really.

I think it's more of a marketing type approach right now.

They're not the only ERP or CR vendors that's taking that text approach.

But there's a lot of noise in the SOA marketplace out there by a variety of vendors and they're --

Yeah.

I mean SAP -- this is Jim.

SAP's Net Weaver is very early out.

Especially around the integration component.

That's a generation 1 or 2 product versus our generation 5 technology platform.

So they're not a serious threat from the integration perspective.

We'd see absolutely no BEA out there.

And I'd say that really it's IBM.

I mean, when we go to Travelers, when we go to the J.P.

Morgan chase's, when we go to these very large corporations.

Other than big SAP shops, which is I think where SAP shows up, you know, it's -- some of these $10 billion plus companies that are SAP, big SAP shops, they've all taken a look at SAP's product and I'm excited, in fact I spoke to one CIO today of a $12 billion company and he basically said, you know, we've had SAP in here for the last nine months and it doesn't work.

So we're not gonna use their integration products and we're -- we're gonna move forward with yourselves.

So I think that's what we're seeing from SAP.

You know, and Tibco's got its place in the financial services and the telephony industry which are big areas.

But grow through acquisitions is a strategy and they're continuing to acquire their market share and I think from a -- from the perspective of true organic products though they do not have that.

And in fact they've had to buy other companies to compete effectively with -- in the business processing human workflow area.

So I think that, again, IBM is the company we see -- they do not offer everything, they do not offer a working service oriented architecture that is open and portable.

We think that the Sun/SeeBeyond combination, by the way, not only is unique but offers a winning competitive advantage, meaning, you know, we have the A to A, the B to B, the ETL.

We've got the BPM and human workflow capabilities and a composite ap capabilities.

IBM talks about some of these, has acquired some of these, and partners with some of these, but it doesn't have all of those working together.

And, IBM -- and -- again some of the ap server technology of Sun's, you know, there's no integration between their own ap server and their integration products I guess is what I'm saying, whereas we and Sun will have very close integration through J2EE.

But Jim is it fair to say that, your traditional EAI products are really what gets you in the door right now.

I mean, I know there's -- there's an evolution going on, with your approach with the suite approach.

But the products that get you in the door, is it -- is it still your bread and butter the eGate type products.

Carv, I mean --

I mean we have a lot of new customers, too.

Really--

You know, packed out to horizons and the whole -- you know, the thread of the discussion on this composite application platform and ICAN were, you know, cut through not only all the main presentations but all the breakouts and side bars and that's really what, you know, is attracting.

ICAN is what's getting us into these customers and it's also rejuvenating opportunities within our install base, where we already have existing, you know, EAI.

Yeah.

I think it's an interesting statistic.

What was it we were talking about in terms of the number of companies that are purchasing ICAN.

That are purchasing the entire stack as opposed to purchasing pieces.

Like 50-60% or something like that.

At least.

At least.

So I think that answers your question.

These deals, Pegasus and Travelers, are generally the entire stack, or six out of, you know, eight products or something like that.

Okay.

Thank you.

Okay.

Thank you.

Again if you have any questions or comments, please press star one.

Okay.

Well, I would like to thank everybody for their questions.

In conclusion, our focus is on profitability.

We believe that we have product differentiation today and we expect to continue to have that product differentiation by making the investments we currently are and will be making in products.

We are very focused on of course growing the revenue, but not at margin expense.

We expect to work very diligently to improve our margin.

So with that, I'd like to thank everyone for again participating in today's call and we look forward to talking to you all again next quarter.

Thank you.

Ladies and gentlemen, this concludes the SeeBeyond actual third-quarter results conference call.

You may all disconnect and thank you for participating.