During a busy week for talkRA, Subex slipped out their dreadful annual results. The full and detailed analysis will have to wait until next week, but the chief conclusion does not require much analysis. The headline news is that Subex generated a pathetic USD61mn of sales in FY13, down 31% on FY12. To put this into further context, Subex was generating USD120mn in annual revenues at their peak, and I still thought they should be orbiting in roughly in the USD90mn-USD100mn band as recently as a year ago. Given that rivals WeDo announced annual sales were USD71mn, up 20% year-on-year, the natural inference is that Subex’s problems are internal rather than external. The stock market seems to agree. Whatever good news rumours perked up the share price on Monday 20th May, those buyers of Subex’s shares found they had wasted their money, with the share price soon tumbling by nearly a quarter to new all-time lows.
The response of Subex’s management to this terrible news inspires less confidence than a man trying to put a sticky plaster over the hole in the Titanic’s hull. Subex CEO Surjeet Singh said:
We have successfully maintained our market leadership in Revenue Assurance and Fraud Management accordingly to leading analyst firm Gartner for the third year in a row.
That sounds like boasting how high you are, having jumped off the deck of the Titanic, plunging toward the deep and icy cold water below, blissfully unaware of the grand piano which is also falling towards the sea, just a few feet above your head. Also, it involves taking comfort from a Gartner report. This would be like paying Gartner to write a report saying I am sexier than David Beckham, George Clooney and Robert Pattinson combined, just so I can include a copy of the report inside a Valentine’s card. It may be promotional, but like Subex’s rusty old product suite, nobody is going to buy it.
Not satisfied with mentioning Gartner as cover for their awful results, Subex issued a second press release a few days later, reiterating the nonsense that they were market leaders. In that release, Vinod Kumar, COO, said:
We are extremely pleased with this validation of our leadership position in the Revenue Assurance and Fraud Management space for the third year in a row. Our perseverance and commitment, to enable telecom service providers build competitive advantage in this volatile marketplace, has firmly helped us consolidate our leadership position. We aim to continue to grow faster, strengthen our key solutions with our Managed Services offering and expand our global footprint…
Whoever does Subex’s PR needs to be fired for such counter-productive twaddle. For a start, WeDo’s USD71mn is more than Subex’s USD61mn, even before anyone argues that Subex’s contract with BT generates a lot of revenue which should not be classified as either revenue assurance or fraud management. Second, the company had a bad year and the figures went into a sharp reverse. Management palaver about perseverance (persevering with a failing business model?), consolidating a leadership position (a 31% fall in sales is not consolidation), and growing faster (what growth does he think he is talking about?), only makes Subex’s management team sound like a bunch of nincompoops who are divorced from reality. Even the supposed volatility of the marketplace could hardly explain why Subex’s sales are the lowest they have been since the acquisition of Azure in 2006.
Six months ago, I wrote that Subex’s management need to communicate a strategy to turn around their business. Since then, we have heard nothing. The conclusion is that this team have seen their ship hit the iceberg, and have no idea what to do about it. Perhaps they are hoping for the share price to finally sink so low that a buyer will swoop in and haul them back to dry land. However, there is a big difference between the scrap value of the Titanic when still afloat, and when she hits rock bottom. This management team keep waltzing around the Titanic’s ballroom, but somebody needs to change the tune.