Which market is suffering most? - E-Finance

Overall corporate IT spending in 2001 is expected to decline more than 12 precent from 2000 estimates, according to Cahners In-Stat. Considering the deterioration of the market since March 2000, that data shouldn't be a surprise to training and software vendors, except that it would be the first decline in a decade. What we believe is pertinent about the data is the segment breakdown by market, which isolates the decline by company size.

In our analysis, the enterprise marker began declining early in the year, starting first with cuts to instructor-led training then a subsequent slowdown in IT software initiatives after an over-investment in IT services and products in 2000. Although the small and SOHO markets saw a delayed impact as the economic slowdown worked its way through the economy little by little or, should we say, business segment by business segment.

IT spending is expected to decline well into 2002 due to the uncertainty of the economic environment, particularly among small companies due to increasing business failures. We believe the impact of reduced IT budgets will continue to affect instructor-led and hardware providers severely, as well as consultant services. We're hoping that the environment will have a more modest effect (although still negative) on software providers as companies assign a greater proportion of limited IT and training budgets to online initiatives due to the inherent cost savings of online offerings versus traditional delivery methods.

For example, collaboration technology offered by providers such as WebEx should continue to benefit from concerns about the safety of and time involved in air travel. In addition, we'd expect average purchase orders to continue to fall as suppliers break products into modules, thus reducing the initial capital outlay. That also should provide future up-sell opportunities when spending resumes to a more normal level for providers that offer a number of different modules.

Should the IT environment continue to fall or even remain flat, we could see significant price cuts as vendors look to stimulate demand. That would put several suppliers our of business through margin pressure and liquidity constraints. Unless the economy picks up soon, we could be in for significant additional job curs and business defaults. Our advice: Preserve cash and look without bias at your current business to avoid getting caught in the backdraft.

Last month, we unveiled a new performance table to help differentiate the corporate sector by niche. November performance was extremely positive, and stocks recovered from the 9/11 sell-off We're hoping that wasn't driven by short covering but by long-term investors looking beyond the first half of 2002 and buying stocks based on the upside of an economic improvement.

Infrastructure stocks led the group-- enjoying a 36 percent increase, with Saba Software up almost 160 percent. The content providers were up 22 percent with a broad representation of positive moves, which is significantly more positive than the select movements of two stocks in the infrastructure niche.

The content management segment held its own, up almost 20 percent, with solid representation across the board. We look for big things in that area in 2002. The collaboration sector rose roughly 8 percent as the momentum behind the group wanes until investors see 4Q earnings that justify current valuation. Overall, the industry rose neatly 18 percent in November.

Peter L. Martin, CFA, is a senior vice president with Jefferies & Co., San Francisco. He follows various segments within the knowledge services industry, which are broadly categorized under e-learning and traditional education and training.

                                                Price    52 Week
Company                              Ticker     11/30      High
eLearning

Infrastructure Software and Service

Click2learn.com                       CLKS      $2.55     $13.25
Docent                                DCNT      $2.17     $14.94
RWD Technologies                      RWDT      $2.41      $5.25
Saba Software Systems                 SABA      $5.75     $21.00
Vcampus Corp                          VCMP      $0.42      $2.75
Average


Content Providers

DigitalThink                          DTHK      $8.42     $18.81
Dow Jones & Company                    DJ      $50.62     $64.30
FactSet Research Systems              FDS      $29.98     $47.49
John Wiley & Sons                     JWa      $23.19     $24.10
ProsoftTraining.com                   POSO      $0.68     $15.00
Skillsoft Corp.                       SKIL     $23.91     $38.94
SmartForce Public                     SMTF     $22.29     $46.56



Collaboration and Communication

Act Teleconferencing                  ACTT      $9.79     $11.97
Centra Software                       CTRA      $6.64     $17.14
Eloquent                              ELOQ      $0.60      $2.09
Genesys                               GNSY      $5.65     $15.29
Mentergy                              MNTE      $0.78      $4.50
Nuance Communications                 NUAN      $9.74     $75.44
Polycom                               PLCM     $34.53     $55.28
Raindance Communications              RNDC      $5.42      $7.40
Speechworks International             SPWX      $8.29     $65.38
WebEx                                 WEBX     $32.11     $37.87
Wire One Technologies                 WONE      $6.91     $10.22



Content Management

Actuate Corp.                         ACTU      $4.76     $28.75
Adobe Systems                         ADBE     $32.08     $77.56
Broadvision                           BVSN      $3.01     $27.19
Documentum                            DCTM     $18.90     $63.88
Imanage                               IMAN      $6.42      $8.50
Innodata                              INOD      $3.00      $9.25
Insightful Corporation                IFUL      $2.34      $4.44
Interwoven                            IWOV      $8.98     $47.69
Macromedia                            MACR     $22.20     $84.63
Stellent                              STEL     $23.54     $64.00
Vignette Corp.                        VIGN      $5.41     $27.13



Instructor Led Training

Corporate Executive Board             EXBD     $33.28     $43.75
Learning Tree International           LTRE     $23.96     $59.75
New Horizons Worldwide                NEWH     $10.88     $18.70
Provant                               POVT      $0.60      $7.25



Average Corporate
Education Companies

                                      52 Week        Mkt     3-Mon Avg
Company                                Low       Cap (mm)   Trdg Vol
eLearning

Infrastructure Software and Service

Click2learn.com                       $1.00       $57.42     142,366
Docent                                $1.48      $105.54     250,987
RWD Technologies                      $1.70       $36.11      14,082
Saba Software Systems                 $1.52      $256.32     700,113
Vcampus Corp                          $0.36        $6.01      22,549
Average
                                     Average      $92.28     226,019

Content Providers

DigitalThink                          $5.34      $323.24     268,938
Dow Jones & Company                  $43.05    $3,201.64     379,439
FactSet Research Systems             $17.80    $1,005.17     174,570
John Wiley & Sons                    $17.90    $1,190.83      43,679
ProsoftTraining.com                   $0.29       $16.58     161,459
Skilisoft Corp.                      $11.75      $360.85     222,356
SmartForce Public                    $13.40    $1,239.37   1,725,417

                                     Average   $1,048.24     425,123

Collaboration and Communication

Act Teleconferencing                  $3.89       $79.08     123,672
Centra Software                       $2.75      $179.68     608,992
Eloquent                              $0.45       $12.09      42,002
Genesys                               $4.55      $162.94      27,193
Mentergy                              $0.23        $8.50      43,520
Nuance Communications                 $5.65      $310.07     510,028
Polycom                              $10.75    $3,201.09   3,135,942
Raindance Communications              $0.74      $250.63     930,590
Speechworks International             $4.10      $261.85     326,356
WebEx                                 $5.06    $1,262.07   1,692,178
Wire One Technologies                 $1.44      $140.89     410,138

                                     Average     $533.53     713,692

Content Management

Actuate Corp.                         $2.80      $314.80     731,402
Adobe Systems                        $22.20    $7,974.40   4,585,003
Broadvision                           $0.68      $917.46   6,872,635
Documentum                            $5.88      $745.29     647,113
Imanage                               $1.50      $150.78      79,210
Innodata                              $1.26       $66.14      59,741
Insightful Corporation                $1.25       $25.58      25,641
Interwoven                            $3.11      $916.09   2,878,453
Macromedia                           $11.30    $1,401.13   1,089,385
Stellent                             $13.24      $497.68     441,974
Vignette Corp.                        $3.08    $1,334.43   5,200,354

                                     Average   $1,303.98   2,055,537

Instructor Led Training

Corporate Executive Board            $22.85    $1,110.60     497,931
Learning Tree Internation            $14.50      $461.78     159,279
New Horizons Worldwide                $8.30      $113.53      18,961
Provant                               $0.32       $13.62     124,598

                                     Average     $424.88     200,192

Average Corporate                                $781.88     930,743
Education Companies

                                                  Return (%)
Company                                      1-Mon  3-Mon     6-Mon
eLearning

Infrastructure Software and Service

Click2learn.com                              -17.2  -27.3      64.6
Docent                                        51.5  -54.1     -69.4
RWD Technologies                               3.0  -21.0     -47.7
Saba Software Systems                        158.7  -37.4     -61.7
Vcampus Corp                                 -16.0  -56.3     -75.6
Average
                                              36.0  -39.2     -37.9

Content Providers

DigitalThink                                   3.6  -34.4      -3.6
Dow Jones & Company                            9.3  -11.5     -11.3
FactSet Research Systems                      10.4   18.3     -26.6
John Wiley & Sons                             18.5   18.1      17.6
ProsoftTraining.com                           79.5  -51.7     -69.6
Skilisoft Corp.                                3.2  -21.6     -31.1
SmartForce Public                             29.6  -24.5     -29.6

                                              22.0  -15.3     -22.0

Collaboration and Communication

Act Teleconferencing                         -10.1   50.8      35.2
Centra Software                               47.5  -35.7     -50.5
Eloquent                                      -3.1  -42.6     -21.5
Genesys                                      -17.7   -1.5     -58.1
Mentergy                                      20.7   52.2     -60.9
Nuance Communications                         15.6  -12.5     -37.0
Polycom                                       22.0   68.1      30.9
Raindance Communications                      19.3  419.8     277.7
Speechworks International                     12.2  -10.4     -41.9
WebEx                                         -2.7   65.2      69.0
Wire One Technologies                        -18.4   45.0      39.8

                                               7.8   54.4      16.6

Content Management

Actuate Corp.                                 39.5  -26.9     -62.4
Adobe Systems                                 10.8   -0.2     -19.3
Broadvision                                   54.5   77.5     -53.1
Documentum                                    24.8   29.9      28.5
Imanage                                       42.2   29.0      79.8
Innodata                                      -7.8   23.6     -53.7
Insightful Corporation                       -21.3  -41.6      -0.4
Interwoven                                    20.8   17.5     -53.6
Macromedia                                    45.3   66.3       3.5
Stellent                                      -0.8   -1.5     -39.1
Vignette Corp.                                 9.3  -24.2     -39.9

                                              19.8   13.6     -19.1

Instructor Led Training

Corporate Executive Board                      3.8  -12.1      -8.6
Learning Tree Internation                     12.4   -0.2      -1.1
New Horizons Worldwide                        11.4  -15.5     -39.5
Provant                                        6.7  -60.0     -74.6

                                               8.6  -22.0     -31.0

Average Corporate                             17.7    9.4     -13.0
Education Companies

                                       Return
                                        (%)
Company                               12-Mon     YTD
eLearning

Infrastructure Software and Service

Click2learn.com                       -75.4    -70.5
Docent                                  NA     -71.4
RWD Technologies                      -41.7    -22.6
Saba Software Systems                 -67.9    -65.8
Vcampus Corp                          -76.0    -50.2
Average
                                      -65.2    -56.1

Content Providers

DigitalThink                          -31.5    -52.8
Dow Jones & Company                   -12.4    -11.7
FactSet Research Systems               -9.8    -19.0
John Wiley & Sons                      19.0     12.1
ProsoftTraining.com                   -91.3    -94.2
Skilisoft Corp.                        47.7     18.2
SmartForce Public                     -36.1    -41.7

                                      -16.3    -27.0

Collaboration and Communication

Act Teleconferencing                   23.5     37.5
Centra Software                        26.4     83.5
Eloquent                              -63.3    -65.8
Genesys                                 NA        NA
Mentergy                              -79.8    -65.0
Nuance Communications                 -70.5    -78.1
Polycom                                 1.9     10.5
Raindance Communications              162.5    200.0
Speechworks International             -73.1    -83.5
WebEx                                  58.0     53.7
Wire One Technologies                  34.8     44.0

                                        2.0     13.7

Content Management

Actuate Corp.                         -74.0    -72.7
Adobe Systems                         -47.7    -42.2
Broadvision                           -86.7    -72.7
Documentum                            -47.2    -60.8
Imanage                                96.9     40.3
Innodata                              -33.6    -43.8
Insightful Corporation                 13.0     41.8
Interwoven                            -63.6    -73.4
Macromedia                            -59.5    -60.3
Stellent                              -44.0    -56.1
Vignette Corp.                        -67.9    -69.8

                                      -37.7    -42.7

Instructor Led Training

Corporate Executive Board             -11.4    -19.8
Learning Tree Internation             -38.3    -51.5
New Horizons Worldwide                -28.1    -19.6
Provant                               -90.8    -85.1

                                      -42.1    -44.0

Average Corporate                     -26.0    -26.4
Education Companies
Per-Firm IT Spending

Market Company Size       2001         Spending Change
(full-time employees)                  From 2000

Enterprise 1,000+         $19 million  -18%
Middle market 100 to 999  $846,000     -13%
Small business 5 to 99    $70,000      -17%
SOHO business <5          $6,000       -27%

Source: Cahners In-Stat

[Graph omitted]

COPYRIGHT 2002 American Society for Training & Development, Inc.
COPYRIGHT 2002 Gale Group