Content to Make a Profit

Delphi Group analysis shows content may indeed be king

January 19, 2001 -- The Delphi Group ( launched the B2B50 Index in July 1999 to follow the profit/loss of a hypothetical portfolio of up to 50 B2B companies. The B2B50 Index cruised into 2000 riding a 2,054-point gain over the latter half of 1999. The Index reached a zenith of 2,940 in mid-March, and then tumbled to -924 as the year 2000 concluded. Over a third of the companies in the Delphi B2B50 lost at least 90 percent of their value; over half of the companies lost at least 80 percent.

In the midst of this overall disastrous performance in the B2B50 Index, only five B2B50 companies managed to generated positive returns on their stock prices over the past 12 months. This group of exceptions to the rule includes Documentum, Informatica, i2 Technologies, Interwoven and FileNet, noted Hadley Reynolds, director of research. Each of these companies provides enterprise software. None is less than five years old or less than $85M in revenue. Most significantly, says Reynolds, each company has a demonstrable business model which underlies an ability to generate profitability in an e-business environment. Two of the five companies (Informatica and i2) are active in managing structured enterprise data and process information. Three (Documentum, Interwoven, and FileNET) address the issues of managing unstructured information.

The unstructured information software providers distinguished themselves among B2B stocks, said Reynolds. These companies provide technologies that enable e-businesses to create, manage and deliver rich content to their customers and partners across Internet-based value chains.

FileNET and Documentum, in particular, posted impressive returns of 50 percent and 22 percent respectively late in the year 2000. This contrasts dramatically with NASDAQ's 30 percent loss in that same period.

B2B strategies need to marry complex value chain interactions with managed online documents, explains Reynolds. The ability of these companies to manage constantly changing collections of rich-media content provides the foundation for new initiatives in collaborative commerce. During 2001, Delphi Group expects to see content management companies continue to outperform the index, Reynolds said.