Subex, the Indian RA giant, have announced solid results for Q2 FY2012. Now that they have sold off the failing activation wing of their business, the focus should rightly be on its continuing business lines. These looked in strong health, with both revenues and earnings up year-on-year. The figures presented by Subex for order intake and pipeline suggested that Subex’s fundamentals will keep improving in future.
The key message emphasized by Subex was how current performance supported optimism for the future, as summed up with the idea of ‘non-linearity’. Put simply, if you sell the same software to lots of different customers, then the drivers for your costs should get divorced from the drivers of your revenues. The key to success in this market has always been to accumulate a large enough share of the market that the revenues support strong recurring investment in maintaining and developing products (to keep a lead on competitors) even though costs start falling as a percentage of revenues. Subex are hinting they have reached that point. If that is true, then unless the market sees significant disruption or dramatic game-changing moves from competitors, Subex should now be looking to ride a virtuous circle to better results in future.