Pick of the big hitters
February 6, 2011 - Openet
Dublin-based tech firm Openet has seen revenues shoot up in recent years, and is attracting the attention of all and sundry in the industry
The number of listed Irish technology companies has been dwindling over the past couple of years.
First, Iona was bought and, more recently, Trintech and Norkom have been acquired. While the older names are disappearing, a new generation of firms are lining up to take their place. Chief among them is Openet, which has been growing its revenues at a spectacular rate and could become a €100 million company this year.
The Dublin-based company announced last week that it had grown its revenues by 60 per cent in 2010.
Over the past two years, its compound annual growth rate has been 55 per cent.
Openet did not release revenue numbers, but extrapolation from its 2009 figures reveals that turnover last year was around €75 million, up from €46 million in 2010. Its operating profits are understood to be €4.5 million, up from €2 million the previous year.
The strong level of growth has not gone unnoticed in the industry. Last year the firm was linked to Cisco, with analysts saying that it had become an acquisition target for the US firm.
However, Openet poured cold water on speculation by announcing that it wasn’t in discussions with Cisco.
According to chief executive Niall Norton, an initial public offering (IPO) is still very much the company’s plan. ‘‘The management team’s plan is to go for an IPO, and we are still very committed to that," he said.
‘‘From our investors’ perspective, at some point of time they will obviously want an exit, but they have been very patient to date. Obviously, if the right trade sale came along and the money was good, they might do it because they are VCs at the end of the day. But the reality is that they are supportive of the management plan, so they are not going to go out hunting for a deal."
Norton’s current preference is to go for a US listing, more than likely on the Nasdaq. Those plans experienced a setback last year when US software firm Amdocs launched a legal action against Openet, claiming that it had infringed on two of its patents. The action is still ongoing, but Norton said that the IPO remained on the agenda.
‘‘There is always a lot of industry chatter about acquisitions," Norton said. ‘‘There is consolidation afoot right now, but rather than get involved in that, our strategy has been to work with our principle partners like IBM, Cisco and Juniper, and develop our relationship with them. We are not necessarily courting them for acquisition, rather there is a lot of stuff we could be doing together to grow our markets."
Among the investors who would benefit from a floatation are Barry Maloney’s Balderton, Cross Atlantic Partners and US venture capital fund SAIC. Maloney and Norton have a long history together.
Prior to joining Openet, Norton worked at Esat Digifone, now O2, where he worked under Maloney. By the time Norton decided to leave the mobile operator, Maloney was already operating as a venture capitalist with Balderton and introduced him to Openet.
He joined as chief financial officer in 2004, and assumed the role of chief executive two years later. He is credited with transforming the company from the loss-making operation he inherited to the strong performer it is today.
The company has come a long way since its foundation in 1999. Founder Joe Hogan is still on board as chief technology officer. At this stage it has raised over €40million from its investors, but that investment is likely to be paid back in multiples when it finally does conduct an IPO, with market observers estimating as recently as last year that it could raise around €250 million on floatation.
The company employs 650 people across the world, more than double the staff it had two years ago. About 250 of those people are based in Dublin, where most of the firm’s product development and research is conducted.
A further 200 people are in the US and 110 in Kuala Lumpur in Malaysia. There are 30 more in Sao Paolo, Brazil, with the remainder scattered in smaller offices throughout the world.
Norton said that he expected that headcount to rise further in the coming year. ‘‘We will probably look to add something between 100 to 150 heads during the year," he said. ‘‘A big chunk of them will be in R&D. We are in this nice space where the macro trends we’ve attached ourselves to are continuing to grow, and our portfolio is selling more."
Norton attributed the firm’s massive upsurge in sales to a number of factors. ‘‘Aside from having a good product and people, we’ve penetrated a number of key industries," he said.
‘‘One of them is the proliferation of smart devices, such iPads, iPhones and Android phones. The complexity of services and range of devices has increased enormously.
‘‘The other trend is related to the capability of the telecoms operators to provide these services at high speed. It’s the ubiquitous internet, whether you get it on fibre, 3G,4G or wi-fi, the operators can provide the fast infrastructure now that allows these devices to become really useful."
One key development for the firm was its development of a monetisation solution for Apple’s iPad. The company launched the new product with an undisclosed major US mobile operator in June. Through it, the customer was able to sell ad hoc and recurring data plans to iPad users.
Subscribers could choose their appropriate plans either on the basis of data usage or duration. With the iPad 2 rumoured to be launching shortly and Apple’s competitors scrambling to get their own tablet offerings into the mix, the product could prove another important string to Openet’s bow.
Openet landed a number of new customers last year, in markets as diverse as South Africa, Indonesia, Brazil and the Netherlands. Closer to home, it announced deals with Orange France and Meteor. However, Norton said that new customers only accounted for around 35 per cent of the revenue growth.
‘‘Typically we operate a ‘pay as you grow’-type business model with new customers," he said. ‘‘So any new deals are not huge, but over time their value tends to grow and we become more of a partner. It is a share the risk, share the reward kind of thing."
The biggest source of revenue growth came from existing customers. The company said that it had strengthened partnershipswith customers such as Cisco, Allot and VPI Systems. It also increased its collaboration with IBM, and announced that it is one the key partners for IBM’s emerging cloud computing business.
Openet specialises in what it terms subscriber optimisation software. Its main clients are telecoms operators, for whom it develops billing and ratings software. The company said that its software helped operators get a better insight into what their customers were doing, and thus enabled them to maximise their revenues.
Norton predicted further growth for the company this year, but declined to put a figure on it. He said that, while last year’s performance was exceptional, there was no reason why it couldn’t continue to expand quickly. ‘‘In terms of absolute percentages, we probably won’t grow as much," he said.
‘‘We got tremendous shareholder support in terms of chasing down opportunities. This year we will probably do a little bit more load balancing in terms of growth and profitability. We have been profitable over the last while, but in the run-up to a market story we need to demonstrate that all this revenue growth will be profitable. It was in 2010, but we went out and hired more people. This year we will probably look to tell a more a balanced story."
In addition to focusing more on cash generation, he said he also planned to up the company’s R&D efforts.
‘‘We have two new products scheduled, but we could probably do more," he said. ‘‘Networks are changing shape. They have to because of the volume of transactions and the latency required. We are well placed right now to fill that need."