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"All we need to do is to get more aggressive now..." - Views on News from Equitymaster
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  • Feb 11, 2000

    "All we need to do is to get more aggressive now..."

    With an over subscription of over 100 times, Geometric Software has been amongst the successful IPOs in recent times. The company is headed by Mr. Manu Parpia - a chemical engineer from McGill University, Canada and a post-graduate in management from the Harvard Graduate School USA. Mr. Parpia worked as a Consultant to Godrej & Boyce for seven years. After taking charge as the Chief Executive in the Electronic Business Division he restructured the division. While the distribution activity was spun off as a joint venture with Tech Pacific Ltd., a leading Asia Pacific IT product distributor, the software activity was spun off as Geometric Software Services Co.

    In an interview to equitymaster.com Manu Parpia, MD, Geometric Software, spoke about the prospects the company

    EQM: What has come to be known about your company is that you are practically an extended arm of SDRC, US itself. Would you go with that assessment?

    Mr. Parpia: I have to answer that as a Yes and No. When I say yes I mean that when we develop software for SDRC we work as an extension of their development arm. In other words we are treated the same, whether it is the development arm of SDRC or it is Geometric. On the other hand we have a number of other customers. So to that extent we are definitely not an extension of SDRC.

    EQM: How much would be the contribution of MSC, SDRC and Moldflow to your turnover?

    Mr. Parpia: Moldflow's revenue contribution would be nil. We have discontinued the selling of packages in the domestic market for Moldflow effectively from this financial year. Our objective is to focus on software development, our perspective is that of a specialist, a solution provider to our customers. To that extent the reselling of a product did not fit into the vision of the company which was the development of in-house technology. We've not given the break up in the offer document but I'd say that the top 5 customers would be contributing around 35% of our turnover.

    EQM: A comment on your corporate philosophy.

    Mr. Parpia: The strength of Geometric as a company and its corporate philosophy is 'people building partnership'. Geometric as a company works with its customers, solves their problems and helps them win. You will find that a majority of our customers are repeat customers and we have long term relationships with them. We try and become an extension of their corporate activities. Many times we suggest solutions to our customers and that has value since traditionally specifications are given and software companies write the code.

    EQM: You have indicated that MSC, SDRC and Spatial will continue to remain amongst your top 5 customers who contribute 35% of turnover. How many new customers have you added over the past one year

    Mr. Parpia: Offhand I can't give you the figures .The question is should you add five new customers who contribute around 50% of the revenue, or should you add 25 customers contributing 50%. Our target is very straightforward, we want the five customers. We are seeking relationship with customers which will have the potential to make a quantum sustained difference to our growth and market value.

    The major thing that we have done we have diversified our geographical approach. We are putting a lot of emphasis into Japan, we've two good wins one is Komatsu and the other is Hitachizosen. Both are high reputed companies. We need one or two more such contracts in Japan and that will be enhance our image. Even now, very few potential customers are actually unaware of Geometric . We don't have to prove too much about our capability and credibility. All we need to do is become more aggressive in the market .

    EQM: Linking up whatever you just said three key customers give a lot of repeat business, the top 5 customers contribute 35% of revenues which would imply 65% from new customers. You said your philosophy would be 5 new customers to contribute 50% of revenues over a period of time

    Mr. Parpia: In due course I hope we reach a situation where the top 10 customers contribute...

    EQM: 80% of revenues?

    Mr. Parpia: No. It cannot be that way since we have a number of products. Product business is not so controlled because licensing revenue, when it comes, is different from different customers.

    EQM: Your products include Featureworks and CAD/CAM works, what would be their contribution to your revenues?

    Mr. Parpia: I cannot give you that since we have not mentioned it in the prospectus, what I can say is the licensing revenues plus our sales to the original equipments manufacturers would amount to 40% of our sales.

    EQM: You are also attempting patenting technologies...

    Mr. Parpia: Yes, we are. Feature recognition is one of them. Feature recognition technology has multiple applications. All objects in geometry are created by including features but when you transfer data from one system to another, when you edit data from one system to another, the feature information is lost. Feature recognition helps you get over that problem. The product is sold at US$ 495 per copy. This can pay for itself in one application. A part of this comes to the patent holder. Solid Works distributes the product as well as provides customer support . So we don't have to set up a distribution network.

    EQM: What sort of R&D and marketing spends are you envisaging over the next two years?

    Mr. Parpia: R&D spends would be stepped up though I wouldn't be comfortable specifying the percentage. If we feel we have a breakthrough on our hands we don't mind doubling the R&D spends. The marketing costs would go up further as we earlier had only two people stationed abroad which has now increased to seven people.

    EQM: How about your billing rates?

    Mr. Parpia: Last year our billing rate was $28,000 per annum per person.



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