Powell is transitioning the company. It's changing from an engineering and technology-led business to a customer/market-focused one. The UDO focus broadens out to include configured archive products (solutions in marketing-speak) with a services component. Manufacturing internally changes to manufacturing externally and configuring internally. The engineering activity broadens to include more software, meaning added value.
So how is Plasmon doing? In the preliminary results for Plasmon's fiscal 2007 group revenues fell 7 percent at constant exchange rates to £35.9m (2006: £39.8m) following continuing decline in legacy products (Raidtec): UDO-based sales grew 18 percent. Eighteen percent is warming but not a dramatic number. As a whole the company lost £15.353 million, compared to £9.524 million in fy 06.
Plasmon expects to reach break-even cash flow during the fourth quarter of the current year. This is through a combination of increased sales, with the Archive Appliance contributing to this, and from OSCA, an OutSourcing and Cost-Alignment programme. It has been initiated and progress is said to be encouraging. Inventories and fixed costs will, it is hoped, go down, and some or all manufacturing will be outsourced, presumably to less expensive places. Silicon fen is going to lose some manufacturing jobs.
So UDO sales revenue will be boosted (detectable by Christmas, 2007), costs shrunk and margin improved producing a profitable Plasmon when? We might expect profitability to be reached some time in 2008/2009. The transition (or return) to a high-growth company is meant to be complete by 2009/10. More details will be forthcoming at the AGM on September 3.
There will be a 3-part sales strategy: existing OEMs; boosted verticals such as health and finance; and 2-tier distribution/resellers for the rest. This third sales tier is in a development phase. There will also be a boosted marketing presence with people like Gartner and IDC looked after and used and a generally louder presence in the IT landscape.
The signs look good. A new document management system integrator, KeyMark, was recently signed up in the USA.
CEO Powell and chairman Jeffrey Hewitt have the Plasmon faith. They bought 21,586 (Hewitt) and 60,000 (Powell) shares a few weeks ago at 45-47p per share. Finance director Tim Arthur appears to have been granted half a million shares as an option to vest in 2010-2017 which incentivises him to no end. Shareholder value is what it is all about. The Plasmon shareholders will only begin smiling when Plasmon's customers are smiling and buying kit, lots of it.
The company's geographic focus is changing. Software is produced in the UK and US. UDO drives are assembled in the US. Plasmon wants to rid itself of of drive and library assembly, library component manufacture and legacy kit repair.
The media is made in the UK, where it is going to remain according to the current plan. Programme management is a US occupation. It might not be too fanciful to find Plasmon becoming more and more US-centric. Ultimately the firm might well say Cambridge should transition from company HQ to EMEA regional office. Not many global firms have Cambridge-based EMEA offices so, in ten years time, who knows where Plasmon's European regional office will be.
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