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Project E-Storm. Operation E-Storm Executive Summary. Long term growth in the electronic commerce market, complimentary vision, common customer targets, and recent equity market movement has created an excellent opportunity to assess a merger between Hurricane and Tornado

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Project E-Storm

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Project E-Storm


Operation E-StormExecutive Summary

  • Long term growth in the electronic commerce market, complimentary vision, common customer targets, and recent equity market movement has created an excellent opportunity to assess a merger between Hurricane and Tornado

  • Attractive Potential Synergies

    • Mission/Goals - both companies are taking very similar paths in their standalone plans

    • Products - broader portfolio increases addressable market prospects for growth

    • Markets/Customers - broader vertical industry presence; could be #1 or #2 in North America

    • Operating Efficiency - Significant new revenue and cost saving opportunities

  • Various Deal Structures Possible, two have the potential to be successful

    • Option A - Tornado acquires Hurricane in a stock transaction

    • Option B - Earthquake acquires Hurricane and then merges it with Tornado

    • Option C - Hurricane acquires Tornado and Earthquake brings additional Hurricane shares to reach majority ownership

  • Preliminary analysis shows NEWCo. is well positioned for global leadership and the deal could be attractive

    • NewCo - US$218 million sales, 1,400+ employees, 85% Revenues in the Americas, 10% Revenue in Europe, 5% Revenue in Asia, no debt, $160 million cash on balance sheet.

    • NewCo is well positioned when benchmarked against Woody

    • Shareholder value growth is likely to accelerate after the transaction

    • Valuation premiums can result in attractive earnings accretion potential, depending on the deal structure

    • Current stock prices for Earthquake/Tornado in an advantageous position for a transaction

  • Need to agree on next steps


Mission - To make electronic commerce pervasive worldwide

Key Strategies -

focus on B-2-B ECommerce solutions, especially large and mid-sized companies

focus on trading community and content vs. software applications and tools

prepare for the EC acceleration in late 1999 to 2000

50% of all revenue will be recurring by year end 1999

increase customer support per customer

leverage installed 40,000+ customer base

Key Milestones -

formed strategic alliance with Baan - 11/8/98

acquired ACQUION & MACTEC’s Material Management Division

Won AS/400 Ecommerce Showcase Product Excellence Award

Acquired Premenos and SupplyTech

acquired EDI Works! To expand its Ecommerce outsourcing business

Mission - leading global provider of network-centric B-2-B electronic commerce solutions that offer both best of breed EC infrastructure and transaction processing services.

Key Strategies -

focus on creating communities that support an entire supply chain

offer high value, mission critical, and hard to replace solutions

expand globally to rapidly achieve worldwide industrial strength status

measurably impact the client’s business via increased revenue, lower cost, and increased customer satisfaction

Key Milestones

created as a result of a major merger - September 1, 1998

selected by Compaq to provide payment engine for new Internet Commerce initiative

certified by the automotive industry to provide ANXZ services to their suppliers

selected by Microsoft to provide payment gateway for new Site Server 3.0

Operation E-StormMission, Goals & Objectives

Hurricane

Tornado

Similar Mission and Strategy!


Operation E-Storm Markets & Customers

HurricaneTornado

  • Geographical Presence - Number of Employees

    or Distributors

    USA 860 emp, Y- distr.45 emp.; Y - distr.

    Canada 5-10 emp, Y- distr.400 - 450 emp;Y - distr.

    Rest of the Americas 10-15 emp, Y- distr.none

    Europe 150 emp, Y-distr.none

    Asia 0 emp, Y- distr. None

  • Vertical Industry Currently Served (Y/N)

    AutomotiveYY

    Banking & Financial ServicesNY

    ConstructionNY

    GovernmentYY

    Oil & GasYN

    Retail/Consumer GoodsYN

    Sports & LeisureNY

    Telecom & UtilitiesYY

    Trade & TransportationYY

  • Customer Segments Served (no of customers)

    large (greater than $500M in sales)5% 1%-2%

    medium (less than $500M, greater than $50M)20%8%-9%

    small (less than $50M)75%90%

Synergistic Geographic Markets, Industry Verticals & Customer Segments!


Operation E-Storm Products

HurricaneTornado

  • Traditional E-Commerce - Product List

    PCTrusted Link Commerce EdiKIt

    STX

    Mid-RangeEDI/400 ECXpert

    MainframeSTX/MainFrame MessageWay

    NetworkNetwork, Net Access,AIBN, BEBN, Web Dev

    Web Hosting, WebTotalNet, Web Hosting,

    Serving, IVAS, INP,Advantage Internet, ANX,

    TemplarBuyWay

  • Emerging E-Commerce - Product List

    Order ManagementTrusted LinkProcurement, Outsourcing@Commerce

    LogisticsTrackPro

    Internet-Enabled EcommereExpress, @Commerce

    Templar

  • Security - Product List

    Firewalls & VPNsPrimeFactors

    CertificatesOnWatch

  • Payments & Processing - Product List

    Bill PaymentCAN-ACT

    Bill PresentmentBell Direct

    Bill Processing

Significant Product Rationalization Synergies!


Operation E-Storm 1998(E) Financials

Hurricane*Tornado

Dollars in Millions ($US)

Revenue

Software $52 $ 6

Software Maintenance -- recurring $24

Network Services -- recurring $36 $45

Professional Services $25

Other $ 5 $25

Total $142 $76

Gross Profit (Gross Margin %) 72%30% - 40%

Operating Profit (Operating Margin%) 17%negative

Customers 45,000+

Employees 1,000+400 - 500

(adjusted for Bell

resources)

*Source: CIBC Oppenheimer

Efficiency Ratios

Revenue per employee $150,000$170,000

Sales & Marketing % of Sales 20.2%>35%

Product Development % of Sales 8.8%>12%

G&A % of Sales 16.6%>25%

Gross Margin Breakdown

Software % 91.0%

Services% 62.3%

Network InfrastructureSourced from SprintSourced from Earthquake

Economy of Scale and Operating Efficiency Synergies Exist!


PARTIAL DOCUMENT – THE REMAINDER IS

VIEWABLE BY THE MEMBERS ONLY


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