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October 28, 1999

PolyDoc Raises $12.3m to Finance Big Ambitions

By CBR Staff Writer

PolyDoc Plc, a small Anglo Dutch company that claims to have a lead in the knowledge management market, is raising 7.5m pounds ($12.3m) through an issue of new shares. It has also acquired a UK firm of consultants and developers of knowledge management products which it believes will flesh out its own range of applications.

Amsterdam, Holland-based Polydoc is paying 8m pounds ($13.1m) in an agreed all-share offer to acquire AppliedNet, a Guildford, UK company which has received backing from venture capitalist 3I Group. Apart from a client base that includes blue chip corporations, the big attraction of AppliedNet is its knowledge agent software, designed to infiltrate, gather and disseminate internal and external sources of information.

PolyDoc, whose shares rose 7.7% to 139 pence on news of the deal, is a company whose backers expect to show explosive growth in a market that London brokers Durlacher expects to increase from an estimated $250m last year to $1.5bn by 2002.

Microsoft Corp and IBM are already moving into the market and document management companies such as Xerox, Documentum and Interleaf will not ignore the opportunities for substantial extra revenues. With a market capitalization of just 40m pounds ($65.6m) and puny revenue of 891,000 pounds ($1.4m) last year on which it made a pre-tax loss of 981,000 pounds ($1.6m), Polydoc seems an unlikely candidate to take on the heavy hitters.

PolyDoc, which is planning to change its name to Sopheon Plc, has the big advantage of having a developed product in the marketplace and a growing number of reference sites. The company sprang out of work done for the European Union – one of the world’s great document producing organizations – and the EU still finances 25% of its R&D budget.

It has an established base of users at Dutch teaching hospitals and healthcare is a vertical market where it expects to make considerable progress. From there, it has moved into the manufacturing and defense markets and its geographical expansion is likely to see the first US contracts announced shortly.

What PolyDoc does not do is write the software engines that analyze unstructured information – it licenses them from a number of vendors such as Muscat – but provides the architecture designed to provide organizations with a knowledge management system geared to their needs.

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Durlacher sees PolyDoc revenue following the AppliedNet acquisition growing to 3.5m pounds ($5.7m) next year and apart from building its own sales channels, PolyDoc is looking for partnerships with consultants and ERP vendors, who are looking for ways to help clients make best use of unstructured data.

With a foothold in a fast-growing market, PolyDoc has no difficulty in raising cash though the pace of expansion means that profits are a distant prospects. But with big players about to burst onto the scene, Polydoc’s success will probably be measured by how quickly it is acquired.

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