Computerland Poland
The company will offer 390,000 shares at zl. 22.5 per share, and expects to raise between zl. 8 million to zl. 10 million from the sale. The shares will be available for purchase June 5-19.
The company's offer comes after three years of solid growth. Sales last year totaled slightly more than zl. 59 million ($25 million), almost two times the 1993 figure. While total sales increased last year, the 16% drop in net profits last year is partly the result of the expiration of the company's three-year tax holiday in December 1993.
After the bear
The public offering has been delayed because management was not sure they could achieve the desired level of liquidity had they held the IPO earlier this year.
Company officials said in addition to raising capital, they wanted more local presence in their shareholder portfolio. During the recent bear market, analysts had said small domestic investors were waiting on the sidelines.
"Our objectives were to make the company better known, to get the extra financing for realizing the company's vision, and to get the company more entrenched in the Polish economy," says ComputerLand's president Tomasz Sielicki, noting that 70% of the company's current shareholders are foreign.
"We wanted to have more of a local presence and there's no better way (to do that) than to go public on the Warsaw Stock Exchange," Sielicki says. "But you have to have proper distribution of shareholders to get a certain level of liquidity on the stock exchange. There were almost no small investors (earlier in the year) and we wanted people to buy little chunks of stock as well.
"I wanted to have at least $100,000 turnover every day and we weren't sure we would be able to do that," Sielicki explains.
But with the recent bullish trend on the WSE, company officials are now more confident they can get the visibility they are after.
"We are not doing this for financial reasons," Sielicki says. "We have all kinds of offers for private placements and the company is strong. Therefore it has already generated money which we can invest in complementary businesses.
"But we believe we can develop faster (with an IPO) and its also better to get the money when we don't need it, as long as we show investors that we will use it properly. Typically, investors would rather give money to someone who will use it rather than someone who needs it," he says.
While ComputerLand stands to gain several million zloty from the sale, the offer is not a large one. Only about 25% of the company will be put up for sale.
The money raised will be used to finance the development of complimentary businesses.
ComputerLand plans to establish "spin-off" businesses in six major areas; applications software, consulting, major systems integration, training, provision of computer interfaces as an independent vendor, and provision of infrastructure (particularly in telecommunications).
The company will develop some of these businesses in-house or establish new companies, but also plans to purchase existing companies and form strategic partnerships with other firms. While the ComputerLand has not bought any companies yet, they do have a couple lined up which they would like to purchase if IPO is successful.
"Current market conditions show that the issue should be oversubscribed," Sielicki says, "and we are selling at an extremely good price." The issue price of zl. 22.5 is about seven times earnings. Optimus SA, the only other computer company trading on the exchange, is currently trading at about 13 times earnings.
"Coopetition" strategy
ComputerLand provides multi-vendor solutions to its clients, working with partners such as IBM, Compaq, Hewlett Packard and AT&T. Ironically, these companies are also ComputerLand's main competitors.
"These companies are our 'coopetition,' we have to cooperate with them and compete with them at the same time," Sielicki says.
One of the ways ComputerLand competes is by leveraging its position as a distributor, rather than a manufacturer, to react quickly to customer needs.
"We are not stuck with the wrong product - we can't be. If we select the wrong product we can always switch it by switching our manufacturer. A manufacturer cannot do this" Sielicki says. "It's a safe solution as long as we are listening to the market."
Indeed, as the information technology industry matures, there is a trend toward consolidation, which also means more competition and lower profit margins, especially for manufacturers.
But since ComputerLand does not manufacture its own products it enjoys a lower cost structure and more flexibility than many large vendors. The downside is that since the company has no products, there is additional pressure to differentiate its services from those of its competitors.
Many vendors, IBM for example, offer a wider range of services, an impressive range of products, and also target the same market. So far, ComputerLand's market niche, network integration, has been a profitable one. But the company's planned expansion into other businesses is an acknowledgment of the need to offer more in order to stay competitive.
Another key element of ComputerLand's strategy is its emphasis on training and immediate delegation of responsibility to newly trained employees.
"We give more (responsibility and training) but we also demand more," Sielicki says.
More than 40% of ComputerLand's customers are in banking and finance. Another 27% are large international companies, with the remainder coming from industry and the public sector. Clients include Coca-Cola, International Paper, the National Bank of Poland, Polish Telecom, Polish Television and the Warsaw Stock Exchange, among others. Management foresees strong growth for the next several years. Their most modest forecast projects average annual
growth of 25% through 1998. ComputerLand SA was founded in June 1991 by a Swedish venture capital firm and Polish businessman Ryszard Krauze with about $100,000.
The company's offer comes after three years of solid growth. Sales last year totaled slightly more than zl. 59 million ($25 million), almost two times the 1993 figure. While total sales increased last year, the 16% drop in net profits last year is partly the result of the expiration of the company's three-year tax holiday in December 1993.
After the bear
The public offering has been delayed because management was not sure they could achieve the desired level of liquidity had they held the IPO earlier this year.
Company officials said in addition to raising capital, they wanted more local presence in their shareholder portfolio. During the recent bear market, analysts had said small domestic investors were waiting on the sidelines.
"Our objectives were to make the company better known, to get the extra financing for realizing the company's vision, and to get the company more entrenched in the Polish economy," says ComputerLand's president Tomasz Sielicki, noting that 70% of the company's current shareholders are foreign.
"We wanted to have more of a local presence and there's no better way (to do that) than to go public on the Warsaw Stock Exchange," Sielicki says. "But you have to have proper distribution of shareholders to get a certain level of liquidity on the stock exchange. There were almost no small investors (earlier in the year) and we wanted people to buy little chunks of stock as well.
"I wanted to have at least $100,000 turnover every day and we weren't sure we would be able to do that," Sielicki explains.
But with the recent bullish trend on the WSE, company officials are now more confident they can get the visibility they are after.
"We are not doing this for financial reasons," Sielicki says. "We have all kinds of offers for private placements and the company is strong. Therefore it has already generated money which we can invest in complementary businesses.
"But we believe we can develop faster (with an IPO) and its also better to get the money when we don't need it, as long as we show investors that we will use it properly. Typically, investors would rather give money to someone who will use it rather than someone who needs it," he says.
While ComputerLand stands to gain several million zloty from the sale, the offer is not a large one. Only about 25% of the company will be put up for sale.
The money raised will be used to finance the development of complimentary businesses.
ComputerLand plans to establish "spin-off" businesses in six major areas; applications software, consulting, major systems integration, training, provision of computer interfaces as an independent vendor, and provision of infrastructure (particularly in telecommunications).
The company will develop some of these businesses in-house or establish new companies, but also plans to purchase existing companies and form strategic partnerships with other firms. While the ComputerLand has not bought any companies yet, they do have a couple lined up which they would like to purchase if IPO is successful.
"Current market conditions show that the issue should be oversubscribed," Sielicki says, "and we are selling at an extremely good price." The issue price of zl. 22.5 is about seven times earnings. Optimus SA, the only other computer company trading on the exchange, is currently trading at about 13 times earnings.
"Coopetition" strategy
ComputerLand provides multi-vendor solutions to its clients, working with partners such as IBM, Compaq, Hewlett Packard and AT&T. Ironically, these companies are also ComputerLand's main competitors.
"These companies are our 'coopetition,' we have to cooperate with them and compete with them at the same time," Sielicki says.
One of the ways ComputerLand competes is by leveraging its position as a distributor, rather than a manufacturer, to react quickly to customer needs.
"We are not stuck with the wrong product - we can't be. If we select the wrong product we can always switch it by switching our manufacturer. A manufacturer cannot do this" Sielicki says. "It's a safe solution as long as we are listening to the market."
Indeed, as the information technology industry matures, there is a trend toward consolidation, which also means more competition and lower profit margins, especially for manufacturers.
But since ComputerLand does not manufacture its own products it enjoys a lower cost structure and more flexibility than many large vendors. The downside is that since the company has no products, there is additional pressure to differentiate its services from those of its competitors.
Many vendors, IBM for example, offer a wider range of services, an impressive range of products, and also target the same market. So far, ComputerLand's market niche, network integration, has been a profitable one. But the company's planned expansion into other businesses is an acknowledgment of the need to offer more in order to stay competitive.
Another key element of ComputerLand's strategy is its emphasis on training and immediate delegation of responsibility to newly trained employees.
"We give more (responsibility and training) but we also demand more," Sielicki says.
More than 40% of ComputerLand's customers are in banking and finance. Another 27% are large international companies, with the remainder coming from industry and the public sector. Clients include Coca-Cola, International Paper, the National Bank of Poland, Polish Telecom, Polish Television and the Warsaw Stock Exchange, among others. Management foresees strong growth for the next several years. Their most modest forecast projects average annual
growth of 25% through 1998. ComputerLand SA was founded in June 1991 by a Swedish venture capital firm and Polish businessman Ryszard Krauze with about $100,000.
