I Look At iLinc
On Monday, iLinc Communications announced that they had sold the majority of their audio conferencing assets to Premiere Global Services for $4.1 million. The press release also said that the company had implemented an overhead reduction program. I wanted to find out more, so I contacted the CEO, Dr. James Powers, Jr.
It's no secret that iLinc's stock price performance has been disappointing over the last year. They are currently trading around the $0.25 level, on a steady decline since last October. Dr. Powers said that while the company has to take responsibility for their performance, you have to attribute about half of the stock price woes to the general market conditions, especially for small-cap stocks during that period.
He told me that iLinc looked at what it could do to improve margins overall and came up with a coordinated set of strategic decisions. The first was to concentrate their sales efforts on hosted licensing for their web conferencing service. Often referred to as SaaS (for "Software as a Service"), this lets companies use the software's functionality without installing anything on their own computers and servers. They pay ongoing usage fees for the right to hold meetings.
iLinc had previously sold a lot of traditional software-as-a-purchase licenses. This gives the purchasing company ownership of the software for a single up-front fee. iLinc could recognize all the revenue at the time of sale, but then only made additional revenue from support and maintenance contracts. Dr. Powers pointed out that organizations have become used to thinking of web conferencing as a SaaS offering, since WebEx, Live Meeting, GoToWebinar, and other heavily marketed products in this space have built that up as the usage model of choice. Unfortunately, the change in emphasis from purchase licenses to SaaS licensing always causes a drop in short-term revenues on the books, as the company can't recognize a big ticket sale price up front.
The second strategic decision was to divest their audio business. There is a lot of overhead involved in operating, maintaining, and upgrading audio bridge software and hardware. Price competition on audio conferencing is fierce, and customers wanted more features, such as increased VoIP (internet streamed audio) and international access numbers. By selling the audio business now, the company gets an infusion of cash during the transition to the SaaS sales focus to compensate for lower cash income. It also lets iLinc eliminate positions related solely to the audio side of things, such as event operators and bridge technicians. There is still a small percentage of audio operations maintained in-house for full-service audio event assistance, but that will probably end up on the block as well, helping to eliminate additional positions and support needs.
The third strategic decision involved an increased emphasis on sales through channel partners, both domestically and overseas. iLinc has significantly ramped up the number of people in the organization devoted to extending and supporting channel sales. The company's internal direct sales efforts will be focused on their sweet spot strengths in areas such as higher education and governmental organizations. Don't expect to see a lot of broad horizontal advertising and marketing coming out in the near future.
Finally, I asked Dr. Powers about the possibilities of iLinc as an acquisition target. I have written before that iLinc seems to be an obvious choice as one of the bigger names in the remaining (and dwindling) field of pure-play independent web conferencing providers. He agreed with me that it certainly seems like a logical target. There are plenty of big companies interested in getting a piece of the Unified Communications pie, as that buzzword remains the darling of the high tech set. They could use an established, mature web conferencing technology as a part of their offerings. He said, "I know that it's likely that someone will come knocking pretty soon... I'm not trying to hurry that process though."
We'll just have to wait out developments and see if Dr. Powers can get things back on an upward trend. For now, they have eliminated some of their low margin operations and overheads, they have a cushion of cash in the bank, and they have a sales strategy for more consistent revenue growth. Bookings and new business appear to be strong, according to Dr. Powers. Now it's all about execution and the whims of the market.
Ken, you should really consider including a disclaimer in your reviews of companies you consult for. Look at Techcrunch and the Washington Post debacle for an example of why this is important.
Posted by: Concerned Reader | May 18, 2008 at 12:49 PM
Interesting comment, Anonymous. Do you work for a web conferencing company YOU would like to give a disclaimer about?
If you are interested, I appeared as an uncompensated guest speaker at iLinc's user group meeting a few months ago. That was well covered and reported on in this blog. I have also appeared as an uncompensated guest speaker on a free public iLinc webinar, as I have with vendors such as ReadyTalk, Citrix, Vcall, Adobe, ON24, and others.
I'm afraid I don't have any other disclaimers to give you. I've never done any consulting for iLinc, nor have I received a dime from them other than reimbursement for my travel costs to their user meeting.
But it's sweet of you to be looking out for my welfare.
Posted by: Ken Molay | May 18, 2008 at 04:24 PM
iLinc's shift in strategy from the On-Premise Software model to the ASP/SAAS model is confusing. Not saying that they're right or wrong for doing it, but I don't understand how they can explain such a strategy to shareholders in the wake of several years of selling AGAINST the ASP model. You know?
Posted by: Curious Reader | May 19, 2008 at 08:55 PM