Industry veteran Joe Krivickas has been brought in as COO as part of an an operational review to realign the business to the new revenue base in a move that suggests that there will be blood-letting among the Oslo, Norway company’s workforce.
The company’s share price has halved in the past year and, while a profit warning alerted the market to dismal figures, a net loss of $26m, down from income of $2.7m on revenue 11.4% down at $34.1m was at the low end of expectations.
Growth of more than 60% in its last two financial years has even alarmed market leader Autonomy. But while FAST was snapping up some important customers, particularly in the e-business sector, it employed dodgy revenue recognition practises, such as accepting Memorandums of Understanding (MoM) as evidence of sales and signing up customers who should not have been extended credit.
Given that $13.5m provision for bad debt of was in excess of the $6m that the company originally said was under surveillance, it was clear that Fast’s dash for top-line growth involved ignoring normal prudent practises.
The company says it has stopped accepting MoUs and FAST says it has tightened its internal control procedures in areas such as reseller operations and invoicing and collections. It reckons that these changes had an adverse impact of $10m compared to the previous quarter.
CEO John Lervik said the company had made strategic changes, focusing on profitable growth. He said the benefit would be that while revenues will continue to grow, albeit from a lower base, better quality revenue would raise profit margins.
FAST drew confidence from the $195m in cash sitting in its bank, with no net debt, so its acquisition program will continue.
However FAST’s difficulties will undoubtedly have put the company’s own acquisition into the mind of the industry’s predators. The loss of investors’ confidence and a stock market value of $572.5m make it a tempting target.
