Asure Software (ASUR) – PART 1 – Transforming a Classic Patent Troll

Asure Software formerly Forgent Networks dealt in the business of designing, manufacturing, and selling multimedia conference systems. By the third quarter of 1995 the stock reached its peak at $26/share. The company had an impressive headcount of 482 employees. The VTEL brand was well established and they had a rapport with resellers and a vested interest from Intel. This rosy outlook saw a volte-face from 1996 onwards as the business experienced low margins along with low growth. Initially price competition contributed to this woe but later Internet based technologies with much more flexibility proved overwhelming. Below is a table that shows how the company’s multimedia conference business unwound from 1995:

Year	Revenue	Earnings	Comments
1995*	$98M	(0.21)	Average Selling Price showed very little increase even though large group conference systems were being sold a lot more than smaller group ones. One saving grace was that a secondary offering brought in $57M and enabling the balance sheet show cash holding of over $100M.
1996*	$97M	(0.87)	Average Selling Price dropped about 15%. Adding more damage was the fact that the selling price was coming despite the company selling more of the high-end large conference systems. Even with the added revenues from the Integrated Communications Systems (ICS) group acquisition the total revenue came in below 1995 figures.
1997	191M	(2.45)	Compression Labs Incorporated (CLI) acquisition for 8.4M shares of stock in May 1997. At that time,CLI was being sued for patent infringement related to video conferencing networks by Datapoint. The share price had slipped to $5 reflecting the companies shrinking growth prospects.
1998	180M	0.12	Blamed merger transition issues for the shortfall in revenue.
1999	152M	(0.66)	Significant drop in revenue. Stock price hovers between $4 and $6.5/share in the 4th quarter. Company recognizes the effects of Internet based technologies providing better solutions at lower overall cost. Acquired the Internet startup Vosaic to enter that market. That acquisition brought in the core team that claimed designing the first multimedia web browser.
2000	134M	0.09	Further drop in revenue. Company formed 2 business units and announced a major restructuring and termination of 34% of employees.

• 1995 & 1996 financials are for 7-months as the company shifted financial year to July of every year as opposed to calendar year.

The following summarizes the financials of the company after fiscal 2000:

Year	IP Revenue	Software Revenue	Net Income/Share	IP %
2001	0	103K	(1.31)	0
2002	31M	0	(0.25)	93.3
2003	49M	0	0.32	90.8
2004	14.8M	1M	(0.83)	94
2005	7.9M	2M	(0.26)	80
2006	12.1M	2.8M	(0.14)	89
2007	36.2M	4.3M	0.47	81
2008(P)	NC	12M	NC	NC

• Between 2002 and 2007 the primary source for revenue was IP licensing.

In 2001 the company divested its products and services business, its main revenue sources. In 2002, the company announced they are an enterprise software and services provider although there was little revenue to show for it. However they did have a new Video Network Product (VNP) announcement, a software program that allowed management of an enterprise’s video network. Through the Global Scheduling System (GSS), they entered the scheduling arena in the enterprise software space. The company also announced its intention to drive revenue from its Intellectual Property (IP) licensing business. By 2004, these two product lines re-branded as ALLIANCE were written off and a charge taken. In October 2003, the company announced the acquisition of Network Simplicity Software. The Meeting Room Manager (MRM), Visual Asset Manager (VAM), and certain derivative products of MRM together formed the NetSimplicity suite of products. With the software business the company is strategically looking to develop a profitable business outside of Intellectual Property (IP) licensing. As of fiscal 2007, the focus is software, an acknowledgement that the IP business is well past the prime. The iEmployee acquisition is the initial step in this regard.

Asure Software Analysis:

1. Part 1 - Transforming A Classic Patent Troll.
2. Part 2 - Building A Business In The Face Of Losses & Delisting Threat.
3. Part 3 - Workspace Management - Can It Be The Holy Grail?