Gamble's hard-nosed solution starts working

By ADAM GIFFORD

A short few months ago, Australian software conglomerate Solution 6 looked like another tech wreck.

During the reign of former chief executive Chris Tyler, its share price climbed to more than $A18 as it bought more than a dozen companies - some far removed from its previous core business providing practice management software for accounting firms.

But after the technology stock downturn and Mr Tyler's departure from the firm - as his Texas drug convictions came to light - the shares plummeted. They now trade around the $A1 mark.

That values the company at just under $A150 million ($181 million).

A new chief executive, Neil Gamble, was hired in October to turn the company around. He brought with him a team of hard-nosed managers.

His welcome package of 2 million share options was soon set aside once the true picture became clear, and instead Mr Gamble will get 833,333 options a year for three years, as long as he increases the share price by up to 40 per cent in each year.

A month ago, the company rebranded all its subsidiaries. Auckland accounting software company exo-net for example, bought by Solution 6 for what was then $A30 million in cash and shares, is now Exonet 6.

In today's wary market, a name change isn't going to win back investors, as Asia Pacific group managing director Neville Buch is quick to concede.

But behind the names, he said, is a top to bottom reorganisation, in which Exonet 6 becomes a key part of the strategy. Part of the problem was the old Solution 6 bought companies and left them to run separately.

Mr Buch, who worked with Mr Gamble a decade ago on the turnaround of Wormald, cast his eye over the group and identified what was working, what wasn't, and where there were overlaps.

"We had areas in different businesses who had identical skill sets, and they were fighting in each other's space. We said that's not the way to do business. We needed to reinvent the business into logical business units."

Solution 6 has forecast that its revenues for the year ending June 30 should be about $285 million for a loss of $25.7 million - although $24.3 million of that came from the first six months, when $10.3 million was spent restructuring and $76.4 million of assets and goodwill were written down.

What is interesting is where that revenue is coming from.

Half comes from three IT services companies in the group: Alphawest 6, - a $105 million Australia-wide business, Evolution 6, which specialises in consulting, knowledge management and all the business-to-business and electronic commerce disciplines, and Cache 6, a $5 million application hosting and disaster recovery operation.

Mr Buch said there was room for more growth in IT services, with room for "a several hundred million dollar regional play."

He said Solution 6 was in talks with New Zealand systems integrator and outsourcer gen-i, but no immediate deal was in the offing.

"There are half a dozen local companies which could fit into a strategy. gen-i is one of a number of groups we have had discussions with."

The other half of Solution 6's revenue comes from software sales.

Some $125 million this year will come from professional services software - Solution 6, Xlon 6 and Viztopia 6 (a British acquisition) for accountants, Cabs 6 for consultancy firms, CMS 6 and Perfect 6 for law firms.

Another $15 million comes from the accounting software Exonet 6, Emphasys 6 and Dataline 6.

A new business, Portico 6, exists to create portals and ASP (application service provider) opportunities.

A law database search product, Lawpoint, was sold for $27 million, boosting Solution 6's cash to about $75 million - half its market capitalisation.

Among the units which didn't survive the reorganisation was Centrum, an ASP which was supposed to deliver SAP software over the internet.

"I killed it and released the value," he said.

That doesn't mean Solution 6 is backing away from ASP, one of Mr Tyler's key strategies. "The question is what services to offer, and how to do it in a phased manner."

He said few in the IT industry would dispute that in a decade or so, applications would routinely be delivered over the internet, as issues such as security and bandwidth were resolved.

The answer for now is Portico 6, which in essence syndicates Oracle database licences and Vignette content server licences and aggregates content and applications. Portico runs its own portals, such as eccountancy.com, or develops portals for corporations or organisations.

Accountants who use eccountancy.com can use the eSite feature to build their own website to service their customers, hosted and with content supplied by eccountancy.com.

"For $A600 a year they can run applications and get $700,000 a year of content, because it's a replication of the mother site," Mr Buch said.

He said Exonet 6 was an important part of the portal strategy, because the advanced three-tier architecture of the latest version - due for release next month - makes it ideally suited for web delivery.

Portico 6 is hosted by Cache 6, which has the data centre at Lang Cove in Sydney and is making its money from hosting and disaster recovery. "I can offer portals and ASP because I have the hosting and disaster recovery business. It wouldn't make sense if I had to build a data centre just to do it."