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April Cablenomics While some of our clients who want to sell their business are interested in "having their cake and eating it, too", that is to say they want to cash out their equity and stay and run the business for the new owner, many of them are primarily interested in finding a partner who will help them finance growth. The hot economy, VDV consolidation to a single media, deferred Y2K upgrades and the building boom "by dot-coms" are some of the factors driving the growth in the cabling business. There are opportunities to do more work than ever before, but this rapidly growing market strains the available cash flow on a small company. How can you hire more people, buy more trucks and material when you don’t get paid up front? You literally can not handle all the business you could win, so you have to miss out on opportunities and who knows how long this growth will last? The usual path to growth is to plan a slow and controlled expansion using internal funding such as increasing the use of credit terms and reinvesting earning. You may already have good terms with your suppliers; most of them are willing to extend repayments past 60 days for a good customer as they are also benefiting from the expansion. Trade credit is seldom enough, but can supplement internally financed growth. Plowing your profits back into the business is usually too slow to take advantage of today’s opportunities and it has the down side of reducing the owner’s takeout. Even then, you can still run out of "cash flow", the liquidity to make payroll and pay the bills. For a strong growth strategy, the kind you need today so this market doesn’t pass you by, you need more money and lots of it. This means going outside your business for capital. The traditional methods of raising capital are issuing debt or equity. Debt is usually preferred because it is less expensive in the end and you don’t give up ownership. You will probably get covenants or terms on a loan that place limits on your flexibility. However, installation companies typically get project work; repeat customers or recurring revenue from service contracts is usually not a significant part of the revenue stream. This makes borrowing money more difficult, as banks or other credit institutions will be concerned that your company can generate enough cash flow over an extended period of time to make the interest and principle payments. Another obstacle is the absence of fixed assets to secure a loan as many contractors lease their trucks and buildings. Some lenders will allow you to borrow against accounts receivable or have the owner issue a personal guarantee. If you already have a loan outstanding you may not be able to get another loan or you may have to accept higher interest charges on an unsecured loan. Raising capital with equity is sometime the only practical choice, especially for a small business that has too much debt or has only been in business only a few years. While this places some or all of the ownership in new hands, it also removes the downside risk to the equity you worked hard to build. You should have a business plan prepared and determine how much money you will need. Unless you intend to go public with an IPO (initial public offering), you will be dealing with an investor or buyer who will use this business plan to evaluate your business and place a price on it. The investor will surely have a different opinion of your company’s value than you do and this leads to a very tricky situation. You will be negotiating the price with your future boss. It is very important that the future working relationship is not permanently affected. The use of outside advisors to assist in these sessions can help as the two of you can assume a "good cop/bad cop" negotiating posture with the outside party. Interestingly enough, several companies and investment firms are taking advantage of today’s high growth market and are increasing their acquisition efforts, especially with contractors/installers/integrators. Many of Gerber & Company, LLC’s clients are these firms, who are looking to become part of a larger entity to help them grow, withstand current profit pressures and cash flow issues or address national accounts, while simultaneously providing long-term upside with significantly less risk. If you are considering selling your firm and are interested in having an initial, exploratory meeting with Gerber & Company, LLC, then you should contact us at your earliest convenience. Ron Gerber, President of Gerber & Company, LLC can be reached at 212-879-6808 (phone) or via email at rgerber@gerbercompany.com. One of the key topics of interest in every field, especially ours, is the Internet and E-commerce. We have asked several manufacturers, distributors and integrators about their plans for e-commerce. Their response varies by their position in the supply chain, their use of distribution and marketing channels and their individual business strategies. We highlight the results of those interviews in this and future Cablenomics columns. Please remember however that Cabling Business Magazine and Gerber & Company, LLC cannot be held responsible for any printing errors. Readers should use this article for informative purposes alone. Any investment decisions should be made with the advice of a financial professional.
Stock Price Table
ANIXTER Continuing our look at how e-commerce is being deployed in the Internet infrastructure industry, I had the opportunity to speak with Peter Bordonaro, Director of Marketing for Electronic Business at Anixter about their e-Anixter offering. Last month I mentioned their press release (http://www.anixter.com/about/news/d0102p09.htm) so, this month I wanted to understand the philosophy behind their e-commerce plans and the reaction of their customers. Peter describes e-Anixter as an effort to reach out to customers, "making it easier for the customer to do business with us." He likes to use the term "frictionless" and feels it will augment sales through increased service to the customer. Giving the customer access to administrative information will mean the sales force can spend more quality time with the customer, allowing them to form tighter relationships. Order tracking is seen as the most important service being offered, according to the customers they surveyed. Customers can view the status of an order, including the shipping information. A link is provided that connects them with the shipping company, carrying the tracking number with it so that they can see where a shipment is, or when a shipment was delivered to a job and who signed for it. Anixter is already doing electronic data interchange (EDI) with hundreds of major customers, receiving purchase orders directly from customer computers. Later this summer they will add online purchasing over the Internet. The customer will be able to have different views and security levels for buyers and purchasing agents so that large customers with remote offices and projects can control access to their information. Peter describes e-Anixter as an "initiative" that they began over a year ago, not a project. It has a dedicated team and continuing plans as a way of doing business in the future. He describes electronic business as not a new concept, just one of many alternative ways of doing business. He thinks that the technology has advanced so rapidly in the last few years that it has become more widely accepted. They began to pilot the operation in the last quarter of 1999, starting with a few customers, but eventually adding over 50 from around the world. The reaction has ranged from very favorable to excited and the sales organization will begin to enroll more customers. Kent Datacomm HOUSTON--(BUSINESS WIRE)—On March 3, 2000 Kent Datacomm, a division of Kent Electronics Corporation (NYSE: KNT - news), announced that they have been awarded ``Best Year-Over-Year Performance: US National Direct VAR'' by Cisco Systems, Inc. Bob Bruce, Director of US Channels for Cisco noted, ``Kent Datacomm has made a considerable investment in infrastructure and training both for engineering and sales associates. Their results have been extraordinary and are on track to more than double again in this coming year.'' Mark Zerbe, President of Kent Datacomm, in accepting the award commented, ``This growth is further evidence of the commitment that Datacomm has made to the dynamic networking marketplace, providing its customers with best-in-class professional and technical services and technology as part of Datacomm's end-to-end solutions for their networking needs.'' Kent Datacomm is among the country's fastest growing integrators of voice, video and data communications networking solutions. Datacomm provides design and consulting, cabling and equipment, staging and total system installation, and complete on-going professional and technical services to maintain major enterprises' networks at peak efficiency. Kent Electronics is among the largest publicly traded specialty electronics distributors and network integrators. Kent's contract manufacturing subsidiary, K*TEC Electronics, is among the leading full-service contract manufacturers in the U.S.
Advanced Electronics Support Products Cabling Business Magazine Adds AESP to Tracking Portfolio Sector Analyst and Leading Industry Publication Note Recent Earnings MIAMI, Feb 16 /PRNewswire/ -- Advanced Electronics Support Products (Nasdaq: AESP - news) has been added to the Cabling Business Magazine ``Cablenomics'' portfolio of networking companies. The portfolio tracks networking industry giants including: Cisco Systems, Lucent and 3Com. AESP's fully diluted earnings per share for its first three quarters of 1999 were $.24 compared to a loss per share of $.54 for the same period in 1998. ``AESP is an up-and-coming player in the internet infrastructure world,'' according to Ron Gerber of Gerber & Company LLC, New York, editor of Cabling Business' Cablenomics Stock Table. Paul Ponn, a financial analyst with Garden State Securities, concurs with the Cabling Business report: ``AESP is beginning to appear on the radar screen of institutions that follow the networking industry. Their price-earnings ratio is far below those of direct competitors. This typically is the time when the biggest returns are realized.'' ``We are pleased to be recognized as a part of this elite group of network hardware manufacturers which includes industry leaders such as Cisco and 3COM,'' commented Slav Stein, president of AESP. ``These independent reports should assist the investment community in evaluating AESP's performance against the industry average.'' Advanced Electronic Support Products, Inc. designs, manufactures, markets and distributes network connectivity products to OEM and end-user customers in the US and worldwide. The Company offers a complete line of products to its customers, including networking products, such as network interface cards, hubs, transceivers and receivers; and a broad range of connectivity products, including computer cables, connectors, installation products, data sharing devices and fiber optic cables. Safe Harbor Disclosure under the 1995 Securities Litigation Reform Act. This news release contains forward-looking statements, which involve risks and uncertainties. The Company's actual future results could differ materially from the results anticipated herein. For information regarding factors which could impact the Company's future performance, see the Company's previous and future filings with the U.S. Securities and Exchange Commission, particularly the Company's 1998 Annual Report on Form 10KSB as amended, which is on file with the SEC. SOURCE: Advanced Electronics Support Products | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||