Sonoma County: News and Notes

Last week, Autodesk reported their earnings for Q2. Now they reported them on a Thursday which makes it difficult for me to get a post out on a Wednesday. Many times companies will report on a Thursday if the quarter is going to be bad. There is only 1 day of trading before the weekend, and the market has a bit of a short memory. Now the reporting date is a bit arbitrary. They have to wait to be sure that there is nothing the auditor is going to make them change, but they normally know what the quarter is the day after. Not the exact numbers but really, really close. So you have to think of the delay as crossing T’s and dotting I’s. They don’t want to have to recast earnings in the future – in other words, go back and issue a correction – so they delay until they are 100% sure.

But this past Thursday brought relatively good news to Autodesk. GAAP revenues were $550M and the company lost $0.44 per share. That is better than what was expected and they have reached a number of Annualized Recurring Revenue or ARR of $1.47B. That is the number that is important as it represents the subscription revenue for the business. This is where the company is heading and it is out of the lifetime product sale. This model shift has been painful to the income statement but there are two numbers off other statements that you should watch. The first is on the Balance Sheet and it is the Deferred Revenue number at $1.1B. This is the subscription revenue that has been paid for but not yet realized (explanation in the next paragraph). The second is from the Cash Flow Statement and is Net Cash from Operating Activities. This is the amount of Free Cash Generated in the Quarter by the Business. The Operating Cash Flow is important because this represents what the company is doing in the business. The Financing side has to do with debt, interest, stock buy backs and other activities that are outside the day to day operations in the firm.

Deferred Revenue is all about recognizing the money for contracts. Let’s say you sign a 1-year cell phone contract. The phone company can not take all 12 months of revenue when you sign the contract. It can only claim 1/12th of the revenue. This is because you may not pay in the future due to issues with the service, problems with your financials, or whatever. This is even true if you pre-pay the entire year. So, subscription companies end up with a lot of Deferred Revenue and as investors, we want to see that number grow as it represents the current view of the future of committed Revenue. Imagine Autodesk sold no more software licenses. Then they are “guaranteed” $1.1B more from customers under existing contracts.

So, the future is starting to look better and better at Autodesk. One cautionary note that I have talked about comes from Kirk Adams of Rosenblatt Securities. The challenge is that the way that Autodesk is describing the subscriptions makes it really hard to understand what the business is really doing in comparison to the past. On top of this, they are creating many packaged offerings and that is making it more complicated. The way we should be evaluating this (over time) is based on New Subscriptions, Churn, and ARPU. Churn is the number of people leaving subscriptions and ARPU is the Average Revenue Per User. Those are standard metrics for Subscription companies. Today, they are still reporting more as a Product based company like talking about the number of licenses sold. Hopefully, this will change over time.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Why do Small Business Owners Hate Sales?

Well, they like the results of Sales. I run into so many people who tell me indignantly, “I don’t SELL!” Then they go off and describe their Sales Process. Some of these processes are very inefficient and I often think as they are telling me that it would simply work better if they would admit to the fact that they are selling. Because Small Businesses need to be very efficient in our Sales and Marketing. It is the thing that makes these Businesses work or not.

The funny thing is that so many Small Business Owners tell me how much they like serving their customers. They deliver quality and value and talk about how much satisfaction that they get from delivering their products and services. You can get them to smile and talk about what they do endlessly. Of course, if they don’t tell that to their prospects then they won’t have customers. And this is the heart of Selling.

There is the stigma of manipulation from the movies. If you watch Glengarry Glen Ross or Tin Men, you would think the whole idea is to get people to buy things that they don’t need or want. But if these Business Owners are smart they will be convincing those that need the products and services to buy them from them. If these businesses deliver quality and value, then it is just the right thing to do. They will help the right people get the things that they need.

However, there is a caveat here. Everybody has customers that buy from them that they shouldn’t. There is pretty much nothing you can do about that. It goes with the territory. Nothing wrong with it, just one of those things that happen. But if you are willing to turn people away that should not buy, then that goes with truly modern selling. As a member of a BNI group, I often give referrals to those that have professions close to mine. My view is that if the prospect is best served then that is best for all of us. I won’t have a customer who is unhappy and the right people will be providing their quality of service. The prospect will have a greater appreciation for a business that I turn away.
The good news is that if you are clear about what you do and your core customers then you won’t have to turn people away often. You can hone your message and be clear about what is great about your Business. Then you can provide a clear presentation, have answers to objections, and ask people to buy from you. That is Modern Selling is the right way to do business. Honest, Ethical, Moral are the watchwords of the Sales Person.
Next week we will talk about why this is so important. Oh wait, make that 2 weeks! I won’t post on Labor Day as it is a Holiday. Have a great week!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Small Businesses, Product Marketing, and Sales

Over the past couple of years, I have done a significant amount of Sales Training in Smaller Businesses. This process has been greatly rewarding but I want to write today about a function that is often missing from smaller companies. That function is Product Marketing.

Most smaller organizations are very thoughtful about Audience Development and Lead Generation. These are the parts of Marketing that get people in the front door. The chief Salesman/Saleswoman at that point is the Business Owner themselves. They close deals and the business grows. The problem comes in with scale. They need to hire people to close more Sales than they can do themselves. Business Growth puts more pressure on their time and they need to solve the problem by hiring others to make Sales.

Most businesses struggle with this first step. They look outside for someone with Sales experience. They particularly look for someone from their own industry. The person comes in and often struggles. There are lots of reasons for this revolving around the Sales process, but one of the biggest ones is the lack of Product Marketing.

So, let me define Product Marketing in this context. Each lead that comes to the business is part of a sub-market for that business. Very few businesses (and fewer small ones) have a homogeneous set of prospects and customers. That means that the Products and Services of the business fill a slightly different niche for all of those sub-groups. And it is here that Product Marketing comes in. It is the ability to translate the broader message of the company into more targeted messages based on these sub-categories. The whole point of Sales is to take this broad message and translate it to the specific customer. The idea here is to package these solutions for Sales.

And that right there is the point. Often times I see companies that expect their Sales team to find their own path instead of helping them along to be productive. That means that the person will be hit or miss instead of a win for the business owner. Think about this, you spent the time and money to search for this new Sales person. You want them to succeed to make your Business grow. And then to let them sink or swim on their own just means that you might have wasted your investment. By providing that skeleton of support, you can turn what a problem into a great hire. It will help you grow and hire even more Sales people.

Much of this is true for all employees, but depending upon a Sales person that is hit or miss is a great way to stifle your business growth. So, take some time think about Product Marketing and make this work!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Net Neutrality Friday

A couple of weeks ago I posted on Calix’s latest earnings call. You can find that post HERE. One of the topics on the call was the possibility of some PON business with Verizon. Given my history on FiOS, I thought it would be good to discuss the possibilities here.

The competition for this business is Adtran. Calix and Adtran are ongoing rivals in the Access Business and now have a shot at business in Verizon. I think that this is going to end up being very complicated for investors to parse and for observers to understand. The business of selling to the carriers has become a primary vendor and a single selection process. This means that second vendors get little to no business and there is no chance to enter the business in the future. On top of that, the pricing that is set and the purchasing behavior means that companies will not have a great chance to cost reduce products. The implication is that you best play to win on both cost and functionality. You won’t get a second chance.

I have to make the assumption that both companies will deliver working products that meet a number of criteria that Verizon will test for. These products are unlikely to be perfect and may require a second pass through the labs. The challenge will be how much customization of the products that Verizon will require for their network. The ONTs that we shipped to Verizon has little to do with the ones we originally planned to ship. Verizon has their own way of doing things and does not feel obligated to take what the vendor already has available.

Adtran has an advantage in that it is already a supplier to Verizon. Adtran is also a significantly larger company than Calix. This may not seem to be a big deal, but the large carriers don’t want to be a huge part of anybody’s business. It prevents problems if Verizon chooses to go in another direction and impact’s their vendors stock price. It also means that the company will be there for the long haul to support the Verizon network. Think about the 5ESS and DMS 100 telephone switches that have been in place for 30+ years. Lucent is on its 2nd buyer and Nortel is gone. Calix does have the advantage of being partnered with Ericsson. One thing is that I would not expect Ericsson to purchase Calix as they have already been burned twice in the FTTH business (Polycom and Entrisphere). This could be the first big benefit of buying Ericsson’s FTTH business.

I think both will be announced as winners and it will confuse the market. One will be the actual winner but I think Verizon has gotten past the single winner business. The first one to reach deployability will be the real winner. I know that Calix has many veterans of FiOS and other Tier 1 deployments. If they are smart, they will listen to these folks about what it means to sell to Verizon.

Anyway, it will be interesting to see what happens. Have a great weekend!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Sonoma County: News and Notes

This week I review Keysight’s Q3 earnings. Note that this is Q2 of the Calendar Year but they do not align their Fiscal Calendar with the Annual Calendar. Revenue came in at $715M and Earnings at $0.53 per share. This was solid Revenue growth of 8% and good earnings growth of 29%. All of this is working from GAAP numbers. The primary contributor to growth was the Anite acquisition that was finalized last year. Without this, the company shrunk slightly.

I want to point out that Keysight generates in a Quarter more than Calix and Enphase do in a full year – combined. So, it is clearly a large company with products that are bought on a global basis. The company claims around 20% – 25% market share in the various segments that it competes. The Operating Profit runs between 15% and 20% on an ongoing basis. There are lots of “right” things about this company. And as I type the company is down almost 9% in after-hours trading. That seems extreme to me so I want to talk about why I think that is.

I want to shift the conversation to Keysight as an investment. They clearly have great products and run a good business. Why is that not reflected in a growing share price? Pretty simple. The last caller on the conference call talked about the Market Dynamics that Keysight is seeing. The Management Team talks about the “Headwinds” that it faces in many areas. The latest of these was BREXIT. What this means is that even though the company is good, the market it is in is not. Keysight faces what looks to be a market that is somewhere between slightly down and slightly up on a regular basis. The challenge is without significant market share gains, this means that Keysight will not be more profitable in the future. The company is pinning these market share gains on the next generation of their customer’s technology. The challenge is there is nothing that sounds like a game changer compared to their competitors. So, it looks to be a steady as it goes company.

What can a company do in these scenarios? There are 3 choices: Enter new businesses, Buy back the Stock, or Give a Dividend. The company can do any combination of these. The challenge with the Anite acquisition is that it has done well in a space that Keysight was already in. The next M&A deal needs to expand the Total Addressable Market of the company, not just fix a broken product roadmap. The other choices are more financial. I greatly prefer the Dividend option as I have said in the past.

Why a Dividend? The other alternatives are unclear on their investor ROI. If the company buys another firm, the acquisition could fail. If the company buys back its stock (and it has been), the price may not go up (and it hasn’t). A Dividend gives the money directly back to the shareholder. Keysight is making over $0.50 per quarter, so a $0.25 per share Dividend would be easy to swallow.

It’s hard to see why an investor would put money in Keysight when there are better return options out there until the Management Team focuses on the Shareholder instead of its internal issues.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Why Coaching not Training?

Training is a part of Coaching. Sometimes the client is missing some skill or set of skills to make them successful. So, why does such a person do better with Coaching than Training?

Think of this as like having a Personal Trainer. They teach their clients specific exercises to perform. One of the things that I find interesting is that they often don’t teach the theory behind the exercises. The one thing that they surely do is hold clients accountable, at least while they are at the gym.

One of the things that is different between Coaching and Training is that Accountability. The Coach is there to hold the client to his or her plan. With Training there is a transfer of knowledge but nothing about an implementation. Implementation is the most important part of the Coaching program. If no action results, then nothing will have happened. Training will make you smarter but if it is not put to use then no value has been created. There is nothing wrong with Training. There are lots of good applications for Training to ensure that people have the skills they need to do their job. It is just that Coaching does more.

When is it appropriate to use Training? The best use is when there is an internal resource that will replace the Coaches Accountability partnership. An example would be a Manager who is using Training to grow his employee’s skill base. The challenge for Owners and Executives is that they often do not have an internal Accountability partner. They either do not have a boss or have a boss with large responsibilities in other areas. People in this situation can turn to an external resource to hold them Accountable to meet their obligations.

Back to the Personal Trainer as a comparison, they hold people Accountable by having regularly scheduled sessions. What they can’t do (nor can a Business Coach) is force the client to do the right thing between meetings. They can ask. They can cajole. They can demand. The client has to do the work. The more they put into the program the more they get out. This is the way to get the most out of a Coaching Program whether it is about your Health or about your Business. Commit, Follow-through, and just do it!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

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Selling in the 21st Century

I am going to add some blog posts on Selling and Sales. Sales are such a critical function in Business and Small Business in particular. The fundamental problem is that most Small Business Owners have a lack of formal Sales background. This means that their Sales techniques are not as effective as they can be. Sales are all about efficiency. Alignment, which I have blogged often about, is the key to efficient Sales and Marketing.

So, this type of blog will focus on that as the first type of topic. Basic Sales efficiency. This is true in creating Sales Processes and Sales Training. It is also true for Product Marketing. This is that boundary function between Marketing and Sales where Product Value Creation has to be explained. Marketing’s job is to create Audience, Brand Awareness, and Prospects. Sales’ job is to convert those Prospects into Customers by connecting the needs of the Customer to the right products/services within the company. I hope you can see that Boundary Problem now. Which group takes accountability for the Benefits of the Product as it relates to different prospect segments. In larger firms, this is a Marketing job. In smaller companies, it often falls to Sales. This is a great place to start talking about Sales Process.

The second thing that we will talk about is the stigma associated with being in Sales. I know you are all thinking about a Used Car Salesman. Many of us have seen movies like Tin Men or GlenGarry, Glen Ross and associate Sales with that ABC (Always Be Closing) attitude. But most Sales today is done in Relationship Selling. This is a different style than what was done in the deep past. The goal is not to close everybody, but to convince people that need your products/services to buy them from you. You know what you have to offer is good. Why would people that need what you have to offer not want to buy it from you?

The third thing that we will discuss in Fear. Fear is the enemy of Sales and Closing Business. Business is Business. You can not expect everyone to buy from you. So, don’t worry about those that don’t and put them back into the Prospect pool. If you don’t take a loss as a rejection of you as a person, it will remove your Fear. This will allow you to go into tough Sales calls and win. Not all of them, but enough where it will be worth it.

So, I hope that you enjoy what I put out in this kind of Blog and have a nice weekend!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business!