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FAST Weathering it out in the Fjords

17-Aug-2007

Tags: Enterprise Search, Selecting Technology, Vendor Viability & Financials,

Three weeks ago, Fast Search & Transfer announced a profit warning, readjusting its projected revenues to the $34 - $38 million range down from the $54 to $57 million the company expected only two months earlier. The company cited "changes in business practice with regard to the non-use of MoUs and the tightening of internal control procedures." MoUs, or "Memoranda of Understanding", will no longer be counted as revenue -- roughly translated: "buy now, pay later" deals won't be used to ramp up revenues any more.

As it turns out, Q2 results came in at $34 million - which is less than the same quarter last year (Q2 2006 saw a revenue of $39 million). Instead of an optimistic growth of about 40%, it's actually down 12%, and means the company is now losing money.

Of course, the question is, why should you, as a buyer, care about vendor financials? Though FAST may only return to profitability in 2008, it's not very likely to disappear anytime soon. And if you've witnessed the eagerness of sales people to close a deal at the end of a quarter, you won't be all that surprised at the temptations that the company now says it'll try to constrain. In the long run, that should be a good thing, and FAST may emerge stronger than before.

The short term effect however, is that Fast Search & Transfer will have to let go of 148 staff (which is 20% of its workforce) as announced yesterday. This is unsurprising, given the company's aggressive expansion strategy was fueled by ever increasing revenue (with an incredible 30 branch offices). With revised profits, those expenses are suddenly too much of a burden.

The question, however, is where the jobs will be cut. Will this affect professional services, which as readers of the Enterprise Search Report will know, we already described as somewhat overstrained? Will you lose the comfort of an office near you? And as much as sales people may seem tangential to your success, if you're in the middle of a selection or proof-of-concept, you're not likely to enjoy a stranger answering the phone.

So even though you may not be too interested in accounting procedures and the stock price movements, and disappointing financial results don't necessarily reflect badly on the technology, caution is advised over the next few months. You may not care about FAST's health, but how they take care of you could be very relevant.

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