How can a software company beat the current blues?

If you are not too big, distinctly focused, have a Rolls Royce clientele, do a bit of products along with the staple of services, chances are you will be able to promise stable growth and not have to worry about reinventing your business model.

And if you are listed and have one or two good governance feathers in your cap then that can be a bonus to your valuation.

Geometric Software Solutions, after posting a (consolidated) revenue growth of 32 per cent (2002-03) at Rs 88 crore (Rs 880 million) and a 33 per cent growth in net profit at Rs 17 crore (Rs 170 million), has issued a top and bottomline (profit before tax) guidance of 'over 20 per cent' for the current year.

That the current share prices are closer to the 52-week low than high does not seem to bother managing director Manu Parpia much. He is more kicked over the fact that Geometric has graduated to the A list of the Bombay Stock Exchange in just two-and-a-half years.

"We were the first company in India," he reminds you, "to issue a profit warning." To him the results reflect "steady progress" towards a  "sustainable, scalable business" and "a sound foundation for future growth."

What is also important to Geometric is that its products revenue from technology licences accounts for 15 per cent of its overall revenue. This is what gives it hopes for "steady progress".

That the times are tough is indicated by the last quarter revenues (ended 31 March) which sequentially (over the previous quarter) grew a mere 2.5 per cent and the bottomline by 3 per cent.

Geometric is focused on product lifecycle management, the genre that sees a product through its entire lifecycle -- from conception through development to delivery to the customer -- bringing together every aspect of its inputs and their logistics.

Even within this, Geometric is doing mainly outsourced development for PLM product vendors. And in the process, it is adding on little bits of its own IP (intellectual property).

Altogether, 85 per cent of Geometric's revenue comes from PLM solution vendors -- writing parts of their proprietary software. A bit (15 per cent) of its turnover comes from industrial design.

While recent results explain the flat nature of the global market for PLM solutions, the confidence about the future stems from the usefulness of such solutions to manufacturing companies.

PLM is typically used in industries such as automobiles, electronics and aerospace. Their investment in new IT solutions may be down today, but there is no question about future demand once the IT providers have solved their own problems of giving businesses a better return on their IT investments.

Geometric's confidence also stems from its relationship with its customers who are mostly large vendors in the field like Dassault Systems, EDS and MatrixOne.

In the last quarter Geometric has initiated a relationship with HP Consulting, enhanced its interaction with IBM and continued the relationship with Ford.