Xro - xero

[Dentie]

I'm struggling to keep up but is $16.40 a new high for XRO?
Only 60c (or a further 4% rise) until XRO is a $2 billion dollar company :)

I await the backlash of all those who say XRO is overvalued. I note however that many of those who have been claiming overvaluation since the $5 mark have since vanished without a trace ;)

I was one of those (still am if I'm honest) ....but no backlash from me Turmeric. Far from vanishing though, I watch with eye watering interest as I am keen to further my education in respect to "how to accurately value a share". No matter which way I try and understand the meteoric rise of this firm (both FA & TA), I cannot for the life of me reconcile with myself that it is nearly a $2b company. To me, the SP is being held up with nothing but bluster, promises and of course key shareholders with very, very deep pockets - but with still a long way to go to turn a profit. At some point, it has to perform by trading financially on its own - not via introduced funds. Disc.... I'm a happy bystander with no financial interest here.

Now I await the inevitable backlash ..... "Hi Rod ..."

[CJ]

IMO the main difference is the size of the respective markets that each company participates in. XRO market is huge but then it only sells for ~$500 year. DIL market is smaller but it sells for ~$20k+ per year.

Imagine if DIL expanded into Govt (local and national):

-It is sad but when Paula Bennetts house was on fire the other day, the only think she saved were her cabinet paper - if that was all on an iPad, no issues.
- Imagine if the GCSB report was on Boardbooks - would Dunne still have leaked it

I have read people comment that even board of trustees for Schools would benefit from the product (though couldn't afford it)


Good on you Dentie, nice hearing from you. As you know I don't dissagree with you entirely and it's always good to hear differing perspectives.

I think it's pretty clear that it's not just key shareholders holding the SP up though. As I understand it there has been no significant new single player investment since Thiel and Matrix back at $6 or so, although clearly funds have been buying in on market as well. I suspect other than US funds the money that has been driving the SP comes from people inside the accounting world in the US OZ and NZ. That's what I am hearing anyway.I suspect Theil is either talking it up to US funds, or US funds are jumping in on the back of Theil - they would have read Drury comments that it will hit the NASDAQ as soon as they get $100m in revenue so they know it is coming their way.

[lastmoa]

I'm not sure why every one assumes a NASDAQ listing is going to be a good thing. A quick look shows that only 12 companies on the NASDAQ have a $1B market cap and is trading on a P/S ratio of more than 50. 11 of those companies are pharmaceuticals - the other is an investment company that holds shares in other digital media companies (Liberty Interactive Ventures) which is profitable and trading on a P/S of 57.48 and a P/E of 2.5.

If you think XRO will be valued higher on the NASDAQ then this should be your reality check. Not a single tech company has a valuation like XRO on the NASDAQ. The most expensive $1B+ tech company listed based on P/S is Splunk - a $4B company which is trading on a P/S of 21.98.


have you heard of a company called Facebook? Market cap of 60billion, EPS of 0.02c, PE of 1240. Zynga has $2bill M/cap and a -0.16eps.
Yahoo, you have probably heard of (sic) .... $27.5billion m/cap with $3.40eps and 7.5p/e. I could go on but got work to do. 8-)
I am not goign to say a NASDAQ (or whatever) listing will fix all ills, but I do see going into a market that is more sophisticated in this IT area as a good thing and good stocks will be reflected in their SP performance there.
I know Xero S/P seems toppy to mean but I think the same conversation will be had when it goes past $20, etc. Lets just wait to the AGM to decide if the S/P has indeed gotten ahead of itself. If they keep delivering on their story, at the AGM, then imho, it hasn't.

[blackcap]

Doesnt anything that is material have to be announced to the market anyway? So no real news can be given at an AGM? Or am I missing the mark here.

[lastmoa]

Hi Dellow,
You and others mention the AGM and waiting to see what comes out of it. What kind of things are you expecting to learn? My experience with XRO AGMs are that nothing of real significance will be announced other than a customer numbers update.
Cheers.

yes, updated customer numbers (and breakdown per region) will be a good gauge that they are continuing to deliver on their story and build closer to their 1mill goal. I am not expecting any other big announcements or hints, like listing in USA, etc. From the AGM I like to 'read' the Xero management and get a feel for their continued passion to realise what they envisage. I feel more can be gained from attending than reading a summary of events.

[Toasty]

yes, updated customer numbers (and breakdown per region) will be a good gauge that they are continuing to deliver on their story and build closer to their 1mill goal. I am not expecting any other big announcements or hints, like listing in USA, etc. From the AGM I like to 'read' the Xero management and get a feel for their continued passion to realise what they envisage. I feel more can be gained from attending than reading a summary of events.

I agree Dellow. I try and avoid anything with a cult mentality or Amway style arm waving but I always come away from the Xero AGM with a good feeling about the company. They are always so certain about where they are heading and deliver a professional presentation everytime. My favourite part is always the customer numbers as this feels like the right "barometer" to me...as long as they are still attaching fees to them.

[Snow Leopard]

KW

Providing that the can continuously announce increased customer numbers and give their believers a nice warm fuzzy feeling after attending the AGM, then long financial viability is so unimportant.

Best Wishes
Paper Tiger

[Snow Leopard]

So I look at $16.40 a share and a market cap of $1.9 Billion and I says to myself in order to justify that then they need to be making some real profits down the line.
I do some modelling over a 10 year time frame, and that's a long time to look ahead.

I try a few sensible scenarios and I try a few really silly ones but the underlying result is much the same and the essential question always seems to be:

In five years time, 2018, will they be generating a profit over $210 million? :scared:

And the answer I believe is No. :t_down:


But the current technicals are still excellent :t_up:

Best Wishes
Paper Tiger

[zs_cecil]

So I look at $16.40 a share and a market cap of $1.9 Billion and I says to myself in order to justify that then they need to be making some real profits down the line.
I do some modelling over a 10 year time frame, and that's a long time to look ahead.

I try a few sensible scenarios and I try a few really silly ones but the underlying result is much the same and the essential question always seems to be:

In five years time, 2018, will they be generating a profit over $210 million? :scared:

And the answer I believe is No. :t_down:


But the current technicals are still excellent :t_up:

Best Wishes
Paper Tiger

If Xero keeps doubling its current revenue@Mar 2013 in the next five years and manages to create a profit margin at 20% at year 5, their profit will be just over $210 million. The customer number will be 2 million by then. Hm.. sounds very challenging. is it really "xero" chance to achieve it? Maybe 10%, I bet. :p

[CJ]

The tricky one is developing a model for cost though.... How did you model cost Paper? I see that cecil assumed a profit magin %, interested in how you modelled cost though.In theory, with a SaaS model, costs can be small compared to revenue as the cost of delivering to an additional customer are minimal. I note DIL has a operating margin of 30% and a GP margin of over 50%

[CJ]

Which is only increasing as well. Who says XRO can't make a lot more than the 10% everyone is figuring in right now? I think those above figures are a little on the conservative side once everything is scaled back and customers are captured...Agree but when will that happen. Drury has said that 1m customers is not the end game, just an easy number for everyone to understand. If his next target is 10m, then we would see sales and marketing costs grow forever.

[Toasty]

Which is only increasing as well. Who says XRO can't make a lot more than the 10% everyone is figuring in right now? I think those above figures are a little on the conservative side once everything is scaled back and customers are captured...

Gee Moosie. You sound like you are becoming a supporter... ;)

[Dentie]

CEO & CFO ... then COO & CPO ... so the pattern should next continue to CYO & CZO ..... acronyms are cool.

[Snow Leopard]

If they want Xero to be expanded into non English speaking countries, I'd recommend a C3PO.

Badabing.

Thanks, i'll grab my coat.

I will open the door for you.

[Everwood]

I wonder if it will reach $17.07 today, it will then become 2 billion dollar company.

[Toasty]

A small article around Xero's share price. Definitely pushing the idea that you can't value it like a traditional company. See the comparison with F&P Healthcare. I am guessing that the big differentiator is the size of the potential market for this type of Saas company.

http://www.radionz.co.nz/news/business/213659/xero-shares-rise-to-record-$16-point-75

Having said that it would be nice to see the costs stabilising but I guess the relentless quest for size will delay that...

http://techday.com/it-brief/news/xero-set-to-create-200-jobs/165390/

[CJ]

you can bet your bottom dollar it willI disagree


Looking pretty good! Announcement from yesterday + good day on Wall Street (including tech stocks) + Bids already matched at 16.80 = $2 billion mark well within reach today!!The US buyers are now on leave - they close up early on 3rd July for the 4th. And given the 4th of July is a Thursday, a lot of them will take off the 5th as well to make it a long weekend. The Hamptons will be busy!

[Toasty]

Wow it didn't just limp to $17 it went right past to $17.05. Almost $2 billion. 2 more cents.

[tosspot]

$17.40 wow speechless. it feels as though everyones just like screw it as long as the share price is oing up everyones making money. keep it that way regardless of whats going on. and yes im sour because ive been in twice just within the last year and only sold out for small profits

[CJ]

I wonder if it will reach $17.07 today, it will then become 2 billion dollar company.Did it ever!


and you dont think minions are around to take orders? money never sleeps my friend...How wrong was I!!!

This is going gangbusters - I cant wait for more info to be released so we can do more back of the envelope calculations.

[Toasty]

Its different this time and the market will never go down...the taxi guys at the rank outside told me this...

[CJ]

$2b+ company now with a p/e of -131. "gimme more debt!" they screamed. and Rod provided. and it was good. and they all drank milk and honey from gold cups.I've pulled you up on this one before - XRO has no debt, it has enough cash in the bank to continue running losses for about 2 years. If it decides the current high growth/cashflow negative approach is still justified, it will raise more funds before it runs out (my guess is they wont get any debt until they are profitable).

While they are adopting a high risk strategy, they are doing it right and implementing to plan (so far).

[CJ]

sorry, imean loses! its just a fact, and its funny to watch the market operate backwards. I've stated I'm starting to belueve now as well ;)I was happy upto about P/S 25

[lastmoa]

I've pulled you up on this one before - XRO has no debt, it has enough cash in the bank to continue running losses for about 2 years. If it decides the current high growth/cashflow negative approach is still justified, it will raise more funds before it runs out (my guess is they wont get any debt until they are profitable).

While they are adopting a high risk strategy, they are doing it right and implementing to plan (so far).

Good post CJ. Whilst the are implementing to plan I am happy with their strategy and the money that is necessary to spend to become a leading global cloud-accounting solution. I also look at a large amount of the increased spend is for the hiring of developers/software tec's which translate to an ever improving product which translates to distancing themselves from competitors. Pedal to the metal.
Call me mad but I actually topped up at mid $15's. And will probably do so more as they deliver to plan.

[Schrodinger]

As I said before understand a SaaS business model before making silly comments.

These models are very common overseas. Read up on Google, Amazon etc and understand what Xero is trying to do and why they have chosen this structure.

[lastmoa]

http://www.stuff.co.nz/business/industries/8877905/Xero-market-value-tops-2b

Excerpt - Chief executive Rod Drury's 18.5 per cent stake in Xero is now worth $377m. However, the stock would inevitably suffer tremendously were he to attempt to suddenly cash-in that holding given his own importance to the company he founded.

Dah. Almost laughable journalism.

[Toasty]

Jeez. $17.50 up now. Maybe no psychological barriers until $20?

[Everwood]

I was just watching Midday Finance News on TV1 and someone from Craig Investment Partners said it could be worth $40 per share in 12 months time.

[Toasty]

Sold out just under half about 3 months ago at $11. A quick check shows that I gave away a years after tax salary. I know you shouldn't focus on these things but....and I know it could easily go the other way but.....

[Dentie]

I wonder how many of the big managed funds are invested here ... and how many are kicking themselves.

[Shore]

It's been an amazing ride. Got in on the game last year when it was at $3.60.. I always knew it was heading to this market cap and beyond but had no idea it would do it at this pace. Just seems to be snowballing.

[blackcap]

It's been an amazing ride. Got in on the game last year when it was at $3.60.. I always knew it was heading to this market cap and beyond but had no idea it would do it at this pace. Just seems to be snowballing.

Make hay while the sun shines and make sure you have an exit strategy for when the snowball reaches the top of the hill and starts sliding down the other side at a faster pace :)

[Blendy]

Sold out just under half about 3 months ago at $11. A quick check shows that I gave away a years after tax salary. I know you shouldn't focus on these things but....and I know it could easily go the other way but.....
Yep, with you there. I think we both sold in the same week. At that time however, it was an amazing price, and we couldn't justify it, so we sold and remember how happy we were? It was the right decision at the time :)

[boofters]

I have an email to my partner suggesting we sell our 50000 gag we bought in1996

[boofters]

And buy Xerox at 2.2.2.275..... no reply duh
The only thing I am still concerned is these guys are only anX X away from being the next Xerox

[boofters]

Pols for the fat fingers but u get my drift.?

[CJ]

Pols for the fat fingers but u get my drift.?Seriously! Use the edit button.

I wonder if any of the current buying is by NZ funds. While there is no requirement for active funds to hold shares based on the index, there performance is compared against the index. Not holding the top performing share in your comparison index must put a lot of pressure on the rest of your investment decisions!

[Toasty]

Usual amount of vitriol on the NBR comments section. Do people really think that the poor mums and Dads are going to get burned on this? I can understand that it may all turn pear shaped tomorrow but my take is that the Mums and Dads are over at MRP getting burned there. Xero investors generally buy the story and realise that its risky.

Anyway an article on the Herald suggests that this is the year of aggressive marketing in the US starting with Xerocon in San Fran to coincide with the Americas cup. Wish they wouldn't call it XeroCON. Maybe XeroGOOD or something....

[gv1]

unfortunate to see the vitriol.

While Xero wasn't for me as an investment (couldn't justify being in DIL, XRO and PEB all at the same time), I acknowledge the value of the people behind the company, and the investors/directors backing the strategy. I use the software, and I agree its very good.

Simiply didn't invest, thinking that the price is highly inflated( might crash like IT/tech shares in 2000)....but it continues to rise. Are WE missing something here?

[Toasty]

Simiply didn't invest, thinking that the price is highly inflated( might crash like IT/tech shares in 2000)....but it continues to rise. Are WE missing something here?

I think it could easily just crash through a sudden loss of confidence. However the Herald article quotes Brian Gaynors opinion that the price is being driven by tech savvy investors in the US who are interested in the rise of customer numbers rather than traditional measurements. They of course could be completely wrong but it makes me feel good that Xero is getting support from one of the biggest economies in the world...

[lastmoa]

it feels like it had gone up too fast. imo the us funds will keep pumping and pumping until that one piece of bad news brings it down to real valuations. might not happen for a year or 3, but the damage is being done right now

Disagree, Moosie. What if they keep on delivering and this thing is only just getting started?
Sure bad news will cause a correction, but don't expect a calamity. Just an entry point, maybe.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10894859

[Banksie]

it feels like it had gone up too fast. imo the us funds will keep pumping and pumping until that one piece of bad news brings it down to real valuations. might not happen for a year or 3, but the damage is being done right now

Yes it has me worried too - not only will this affect XRO and the sector but also the whole NZX as they are now close to being the biggest company.

[Banksie]

doesn't help that most of the stock is tightly held as well. just adds to the price inflation

Which raises an interesting point. Should the holders sell some of their stock to relieve the price pressure?

[CJ]

Which raises an interesting point. Should the holders sell some of their stock to relieve the price pressure?They will need more cash in a year or so the new issue will dilute them some more. What is disappointing is last time they did a capital raising, they only did a placement, not a SPP for all shareholders which would have increased the liquidity.

Some of the big shareholders also took the opportunity to sell down in that placement too.

[Toasty]

$17.97 hit this morning. I wonder if we will see $18 today? I would love to know who is actually buying.

[Toasty]

$17.97 hit this morning. I wonder if we will see $18 today?

$18. I guess we will then Toasty. Nice call.

[Shore]

Can I ask how a regular layman gets access to the real time pricing like you guys have?

[bunter]

Revenue $39 million, profit -ve14.4 million, market cap 2,000 million!

So what's the market saying - the turnover will go up 25-fold to $1 billion and profit up to $150 million in the next few years? Or better?
The chances of that seem small.
The chances of this loss-making company getting out-competed by established companies and going bust seem far higher.

[Toasty]

Can I ask how a regular layman gets access to the real time pricing like you guys have?

I use the Direct Broking trading site. Lots of useful stuff like depth and historical pricing charts etc.

www.directbroking.co.nz (http://www.directbroking.co.nz)

[Toasty]

Revenue $39 million, profit -ve14.4 million, market cap 2,000 million!

So what's the market saying - the turnover will go up 25-fold to $1 billion and profit up to $150 million in the next few years? Or better?
The chances of that seem small.
The chances of this loss-making company getting out-competed by established companies and going bust seem far higher.

I agree that it is a difficult proposition. The positive here seems to be the execution so far and the customer acquisition approach of using the accountants to generate the customers by effectively changing over whole practices. A lot of companies hitching their wagon to this delivery system makes it reasonably sticky.

It doesn't hurt that they have won just about every award possible for a software company.

[CJ]

Can I ask how a regular layman gets access to the real time pricing like you guys have?I use ASB Securities - the default view is delayed 20m but if you refresh, it goes live. I assume all the brokerage sites are the same, once you login.

[CJ]

Revenue $39 million, profit -ve14.4 million, market cap 2,000 million!

So what's the market saying - the turnover will go up 25-fold to $1 billion and profit up to $150 million in the next few years? Or better?
The chances of that seem small.
The chances of this loss-making company getting out-competed by established companies and going bust seem far higher.It is very easy to model to justify the price. Only think is can you justify revenue doubling for a few more years to come:

2013 2014 2015 2016 2017
Revenue 39 78 156 312 343
Opex (56) (84) (92) (102) (112)
Other cost (11) (12) (13) (15) (16)
NPBT (28) (18) 50 196 215

P/E 20 1,006 3,914 4,306

[Banksie]

thereby being the first moose to achieve orbit

Sorry to burst your bubble mate.
4630

[Toasty]

Looks like the bot is back. Moosie can probably confirm...

[blackcap]

Turmeric... be very careful. Shareprice is totally irrelevant in the long term scheme of things. Saying my company performs better because my shareprice is up whilst the other is down is immaterial until said share is realised. Ultimately it is the cashflows that your investment generates and gives back to you that will determine whether an investment is a good one or not.

[Banksie]

Any one know what type of database structure Xero are using - object oriented or relational

I think they are using MS SQL Server (http://blog.xero.com/2013/01/migrating-to-a-new-primary-data-center/) so on that basis a relational database.

Why do you ask?

Edit: The information about the database is right at the end of the article in the link.

[Toasty]

I think the market took me seriously when I said the last announcement was worth $1.75!!!

Can you predict it to be $50 by next Friday? That should save some time.

[gv1]

This is big brother stuff. I wouldn't touch such things for my co. This is all designed for one thing, that is control of people and companies. Companies and people don't realise this but they will have to pay for this..

[Banksie]

Competitors that also use relational databases can simply create a new UI for the cloud - there is no technology moat. In order to copy features and functions that exist due to OO programming, you have to rebuild the product from the ground up. Much more difficult. It is something that comes up in discussions of Workday vs Oracle, SAP and is used to justify Workday's potential (and thus extreme share price).

I hadn't thought about that angle, I will need to do some more research. I must admit I was a little surprised to find they use a relational database from a scaling and performance point of view. I would have thought they were using an object-orientated or NoSQL platform.

[blackcap]

Firstly, when did I say that? If you were referring to my comment to KW re MNF it was tongue in cheek and you will note in the same breath I asked for advice on where to get good info on the two companies he suggested.

Secondly, I have materialised nearly half of my initial investment in XRO (for about a 400% gain on my total investment)- so as you say SP is very relevant.
I was implying more in general turmeric, not really having a dig at anyone. I have seen many clients in the past hold onto IPO shares for a 5 fold gain, not willing to sell any stock at all and having seen the SP fall to below initial IP levels. Im glad you have realised some of your gains.. indeed you have done well and in your position I would be holding on to some at least for the ride up. Fundamentally I will not be purchasing now but I have already outlined those reasons earlier.

[Shore]

I have a feeling that in a few years time we'll look back on today's SP and think it was dirt cheap. ;)

[Arbroath]

I have a feeling that in a few years time we'll look back on today's SP and think it was dirt cheap. ;)

I equally have a feeling many will look back and think why did I buy those Xero at 15-20 bucks...time will tell

Sky TV was overtaken by Xero today and it made a net profit of $123 last financial year - although clearly its future revenue streams could be pressured by internet sports etc changing their market. We live in interesting times.

[janner]

All of this and many other similar programmes are about ACCOUNTING..

Simplify the TAX LAWS.. Accountants are stuffed..


with the introduction of fibre i can see the VM appearing on your Virtual computer, so who need a browser any more. This browser based solutions are really a horror story from a development solution stand port, but not from a deployment stand point.

you cant just open a text file and update your business solution with a few simple business logic statements and the VM render your customised business solution on the spot.

Just becuase the current generation of accountant and business user is limited in technology skills and scared doesnt mean future generations will be as useless with technology as this generation of old farts.

business software logic can be complex but classes of business logic processing can be translated from simple business logic statements that can be edited in a text editor into background business class systems and rendered on virtual machine systems.

zero and this current generation of software is already far out of date and pretty dumb.

[fungus pudding]

actually most of these so called business systems are not about accounting at all but about software.

the accounting is usually single dimensional in these systems.

the accounting solutions are built by people without an in depth knowledge of practical accounting in the field.

private businesses like ours do not as yet provide our special accounting tabulation software for the public to use let alone for accountants to use.

the solution is not simpler tax rules which is a misnomer


That is hardly a misnomer.

[Joshuatree]

Excuse me if this is already common knowledge but ive just seen on Fishpond a book for sale"Xero For Dummies" you know the huge global black and yellow series. This has got my int more than anything else.

[Joshuatree]

Dummies pay more.:)For you $35.83, great spiel about the business too.

[Joshuatree]

Cheers , 250 million books and 1800 titles, what a business!!.. I confess i have an "Imac For Dummies" but have barely opened it, dumb aay;.. more forgetful really.

[Toasty]

And on it goes. $18.65 up today. Maybe a bit of hype in the US at the moment with the lead up to XeroCon on the back of the Americas Cup in San Francisco.

[FarmerHamilton]

There's an Americas Cup in San Francisco?

There was a one horse race today ....

[CJ]

There's an Americas Cup in San Francisco?


There was a one horse race today ....
Pretty stupid only having 3 challengers, one of which doesn't have a boat and another refusing to sail.

Having said that, TNZ looked very impressive foiling with the SanFran skyline so close in the background. It could be a really interesting spectacle, if only there was some actual racing.

I just hope we win it, so that $36m of taxpayers money is not wasted and the next series is raced between North Head and the viaduct so all can enjoy it!

[blackcap]

Interesting too isnt it with stocks like this one and others.... when they are going up there is a lot of chatter etc. But on the way down things often become eerily still :) No time to panic, this is just profit taking isnt it? :P

as I write down another 30 cents.... 1700 hit :)

Dead cat bounce bound to happen but Im not going to touch this one!

[Dentie]

Interesting too isnt it with stocks like this one and others.... when they are going up there is a lot of chatter etc. But on the way down things often become eerily still :) No time to panic, this is just profit taking isnt it? :P

as I write down another 30 cents.... 1700 hit :)




Dead cat bounce bound to happen but Im not going to touch this one!

That big sell was probably Rod... he's probably run out of things to say

[Toasty]

That big sell was probably Rod... he's probably run out of things to say

Lol.

And only yesterday brokers were saying things like:

"There's been huge hype building into that share price," Williamson said. "Analysts have been crunching the numbers and it is a pretty exciting end result if it all goes to plan. Investors are counting on Xero increasing that customer base significantly."

I am still a way from understanding the market.....a long way...

[tosspot]

everyone who is holding these shares must constantly be on the edge pissing there pants. as soon as there is a bit of red. bulk selling sets in. if it pulls back below $15 i may jump in

[Toasty]

everyone who is holding these shares must constantly be on the edge pissing there pants. as soon as there is a bit of red. bulk selling sets in. if it pulls back below $15 i may jump in

I think you are right. Nervous crowd perhaps. Its funny how its self fulfilling.

[lastmoa]

Lots of doom and gloom on this thread. 8-)
Good to see a correction after such a hefty run up. The story hasn't changed so no reason to sell. If anything the fluctuations we may now see, prior to the AGM, may be the only buying opportunity people get, prior to them getting large USA exposure come Sept.
Yes, I am a holder of Xero and will remain so. Looking at the bigger picture here so no troubles with some interim noise.

[tosspot]

I think you are right. Nervous crowd perhaps. Its funny how its self fulfilling.
lol yea I admit though im only sour because I sold out early twice. I would rather be in the nervous nelly shoes

[Newman]

Jeepers...I didn't even realise it had taken a hit. I'm not that surprised though, and a little comforted by the fact I sold a chunk yesterday. This trend seems to mirror the SP fluctuations of about 2 months ago. Around that time we saw the SP rise around 35% then drop 15%; this time the SP has risen about 30% and to date dropped back by about 10%. I guess this might be par for the course now? Traders heaven is it not?

Is this the beginning of the end or the end of the beginning?

[Toasty]

Early to say but it may have bounced off the $16.84 mark and turned around again as people took a stand and realised that there was no reason for it to be going down....or up for that matter.

[Toasty]

I am reminded of a flock of birds eating bread who scatter when startled and then drift back slowly at first and then more quickly as they realise the other birds are eating all the bread...

[Shore]

It would be unnatural if there wasn't some level of profit-taking going on... I actually feel a little bit better when the stock pulls back a bit.. the net effect is always for the best.

[Lorne Ranger]

Natural for SPs to fluctuate, they all need to breathe, and I guess given the rate of ascent here it takes bigger gulps of air than any other to keep climbing. Its just an uncomfortable ride to have to heave along with it and frankly its giving me nosebleeds.

[Toasty]

There is this news.
http://www.businessspectator.com.au/news/2013/7/9/technology/intuit-opens-quickbooks-api-australian-developers (http://www.businessspectator.com.au/news/2013/7/9/technology/intuit-opens-quickbooks-api-australian-developers)

I like the bit where it says: "Quickbooks product manager Nora Tucker said she hopes the move will “attract Australia’s best programmers” into working with the product"

I don't want to be a Xero acolyte but I feel it sounds a bit desperate. I am sure Rod will have something to say.

Bolding done by me.

[PlatnuM195]

The bull goes up the stairs and the bear goes out the window.

All joking aside, still plenty of upside I believe. Healthy correction today though and I can see it extending for a while longer.

[lastmoa]

They are the world's leading accounting software provider. They have 45 million cloud customers not 150,000. That's a REAL customer base, not the fantasy Xero one. Who wouldnt want to work with them?

Wow, and Xero wants just 1million .. not asking for much. 8-)

[sideburns66]

expect another profit taking day followed by more uptrend. if you have the balls and been considering it, jump on in!

Maybe a dead cat bounce today? Or maybe yesterday was the last opportunity for anyone with some BIIIIG balls to "jump on in"? :p

[lastmoa]

Article from a Wanganui accountancy firm. Seems her business is very busy converting happy clients over to Xero :
http://www.wanganuichronicle.co.nz/news/cloud-accounting-sends-firm-sky-high/1942763/

[sideburns66]

KW / turmeric , have either of you got any links to any posts / sites regarding basic info / explanation of TA? New to investing and would like to learn as much as I can about it and this method seems quite interesting / useful to me. Thanks very much :t_up:

[sideburns66]

Appreciate it guys - hadn't noticed KW's thread and I'll for sure give that a read. Definitely wouldn't consider myself a trader - as you said just trying to teach myself basic levels of fundamental analysis and then looking at good timing to add the 'cherry on top' :) Hopefully can provide my 2c worth one day and particularly interested in what you've mentioned here as a XRO holder myself!

[CJ]

A positive blog post for those holding: http://1234567890.typepad.com/xero/2013/07/xero-badly-beats-quickbooks-and-quickbooks-online.html

[lastmoa]

A positive blog post for those holding: http://1234567890.typepad.com/xero/2013/07/xero-badly-beats-quickbooks-and-quickbooks-online.html

Thx CJ. Nie article and I see this USA guy also has other relevant blog posts too.
Nice to see his comparison of Intuit ($19bill m/cap) with Xero.

[Toasty]

If you store your transactions in simple xml or excel files and you have less then 10 to 20 thousand records a year you dont really require an accounting system unless you run inventory or need costing solutions. That being said if you dont VBA skills you wont be able to group and sum your data but the lastest versions of office provide data wizards to accomplish basic tasks.

Any product that traps your data in SQL databases that are purchased from major venders is going to trap you into a Product from a Company......etc

I am not sure of your point here Steve. Are you saying that accounting systems provided by third parties are not a good idea? My understanding is that it is very easy to export your data from any of these systems and then reimport it into another system or even a simple spreadsheet.

Or are you selling an alternative system that you have designed and think is simpler? Not being a programmer most of the info above is lost on me and I assume that you are just providing a description of how your system works in the hope that people will adopt it.

Is this forum the launch pad for a competing product?

Also I assume that Zero that you refer to is Xero? Is this a deliberate attempt to ridicule the company that this thread is dedicated to or just a misunderstanding?

[Shore]

I think you've made your own point surfersteve - the average small business owner has no clue what you just said and frankly doesn't want to know (they have a business to run after all). They want to pay a nominal sum every month that they can expense and have an intelligent and simple system run it for them. You also don't take into account the years of change and innovation ahead of us - complete online tax filings at a push of a button, valuable information about the vertical you're working in - all of this that Xero will continue to innovate and stay on top of, stuff that the average small business user has no hope of managing with their simple text file or excel document as you advocate.

[CJ]

If you store your transactions in simple xml or excel files and you have less then 10 to 20 thousand records a year you dont really require an accounting system unless you run inventory or need costing solutions. That being said if you dont VBA skills you wont be able to group and sum your data but the lastest versions of office provide data wizards to accomplish basic tasks.

Any product that traps your data in SQL databases that are purchased from major venders is going to trap you into a Product from a Company.

If you use Quick Books, or Zero or Sage you are to some degree always trapped and the user doesnt not care until they care.

We wrote an open platform for data and code many years ago when we needed advanced reporting that catered for management and tax.

The code base was housed in simple text files so the code was open source and the data could be stored in any main database or even xml and users could modifiy the code base and the data.

The runtime platform was where we did the programming not the accounting code statements which were just generic data statements.

we are currently re opening this project on windows and on Java so that we dont have to use this solutions where users dont own the code and addons are costly to develop.

To create an accounting addon all the user developer has to do is open a text file. Type in some simple statements that dont require computer programming oop knowledege and the software addon works.

In fact there is no accounting code with this approach, just some very simple statements that a background runtime creates classes from and executes.

Totally open, no closed system.Blah, blah, blah. Didn't understand much of that.

Or, you could pay Xero $600pa and have a system that has system controls audits done on it. I wouldn't want to be an auditor, auditing a custom built accounting system (in fact I wouldn't want to be an audit but that is beside the point).

Yes - only $600pa - Which I value at less than 2 hours of my time. How long would a spec built accounting system take to build and maintain? Remember Xero is constantly being upgraded and improved.

[Toasty]

I think the point i have badly made is that a lot of people around the world want to be able to customise there transaction processing. for many people that option is not required. For some and not in small countries the option to customise transaction processing is something very powerful. Remember the world is a big place and many many people do have basic skills in using software, more then in a small country as wonderful as it is.
etc, etc.....

I hope you have a marketing department in this company of yours because somebody needs to translate this into English. I haven't got the faintest idea what you are talking about.

I am also struggling to see how this relates to Xero? I think there is a separate forum for product advertising. Maybe you should post this stuff there?

[Toasty]

"You also don't take into account the years of change and innovation ahead of us"

SQL hasnt changed much in decades, the back engine have.. Javascript and the browser? Right ...... im really scared about that one. Zero is just using the same non strongly typed scripting junk as everyone else. there is nothing special here... your imaging innovation... and thats whats so great, the creators of zero are laughing all the way to the bank...

And also if you are respectfully trying to make a point then stop calling Xero Zero! I bet you would hate it if somebody persistently misspelled your company name?

[Shore]

my apologies, the point i have badly floated is that a product that is built using the same technology that is freely available to everyone, html and javascript and SQl is a product that any company in any country can compete against. Zero sum game...

I think any company on the interwebs is doomed then!

[CJ]

my apologies, the point i have badly floated is that a product that is built using the same technology that is freely available to everyone, html and javascript and SQl is a product that any company in any country can compete against. Zero sum game...So thats what you are saying. There is nothing unique about Amazon.com, in fact it was copied in NZ by Trademe. Now that Trademe has the first mover advantage in NZ, Amazon hasn't even bothered.

I have always said that Xero biggest risk is that one of the big established players will launch a similar product. Currently their products aren't as good. There is also competition from new small companies like Wave.

But you also need to remember that Xero only needs to get 1 or 2% of its target market in the US and it will surpass its current target of 1m customers.

[lastmoa]

"I think any company on the interwebs is doomed then!"

i didnt not say that <g>, although fibre to the door does mean there will be first class citizens on the web and the rest still using Ajax, Jason and the browser... it will in an instant create opportunities for more powerful technologies waiting in the wings that at the moment site on the server or on powerful multi core laptops to ascend to your living room or business and make redundant the browser technology that was never designed for the purposes they are currently being put to.

Dude, SuferJoe or whatever .... Think about what you are saying here. Having quad core processors for the 'average' user to access software. But that is gong back in time from where we are heading with cloud technology, where all the user needs is a 'dumb terminal' that only has browser capabilities. Because that is all they need! Let the companies that run the services look after all the heavy infrastructure and the resultant security, backup, compliance issues. That's what this shift is all about.
Sure you and your team (with due respect, maybe Indian) have written some products ... I wish you the best with gaining traction with them. The thread here is not your target market though. Knock on the door of the Accounting Assoc, maybe or got to the Zero thread, or create one if it doesn't exist.

[maddog]

Whats far more interesting is what is happening with the Xero share price today. Down $1.30. That's a massive drop following on from the sell-off over the last week or so.

I'm not aware of any news that would have precipitated this - just seems to be a sell-off followed by some panic to get out (perhaps by those who recently bought in at high prices) before it goes even lower which of course makes it go even lower. It will be very interesting to see what happens. Markets are funny things expecially when there are no fundamentals to assess and there are widely varying views on the strategy and implementation.

[lastmoa]

dellow, i didnt say i belonged to any team or was writting an accounting product.

the browser is the past

thats why facebook had to dump huge amounts of development recently and move to ??? Native

Please provide a link to any article stating this. I want the news article link, not heresay.
The only big thing I see FB working on is how to monotise there business model sufficiently via mobile devices, which has less real estate space for traditional adverts. And this answer would probably more relevant to the SNAKK thread.
But we digress from Xero with this chatter.

[blobbles]

"I think any company on the interwebs is doomed then!"

i didnt not say that <g>, although fibre to the door does mean there will be first class citizens on the web and the rest still using Ajax, Jason and the browser... it will in an instant create opportunities for more powerful technologies waiting in the wings that at the moment site on the server or on powerful multi core laptops to ascend to your living room or business and make redundant the browser technology that was never designed for the purposes they are currently being put to.

I think you will find steve, if everybody designed their own accounting system as you have described, there would be so many errors/issues with their software that Audit firms would need to be massive (as they would need to audit your individual custom made computer system for errors every audit), reliability of accounting systems would drop (meaning more issues down the line, tax, estimation of GDP, growth, you name it) and most IT people would be employed fixing/maintaining accounting systems.

This is the beauty of having a few ubiquitous systems, you see. The companies that make them have audited the systems hugely, meaning less problems, higher accuracy and systems that Audit people are used to seeing and can trust. This in turn relates to better company performance and better economic performance.

You will find a point, as your company grows, that a VBA/Excel solution just doesn't work anymore. The overheads become to great, the demand for changes becomes too many and the ability to make changes becomes more difficult.

As another IT guy with 10 years experience in backend financial systems for everyone from Banks to NGO's, I can say this with some authority.

Besides, Xero's solution is a lot more flexible than yours. Can your accountants log into the data from anywhere (if they are separate from your business)? Can you view your accounts from your smartphone? Can you use any of the add on components which work with Xero simply by paying a fee (e.g. if you needed to build an add on inventory system... you could just pay for one using a Xero partner, you would have to build one from scratch)?

[keeny]

dellow, its not information they are going to advise you on. They were working on an application framework for browser based technologies and they had to dump it...............it hurt them bad.

Steve - are you a developer?

[maddog]

Surfer Steve - while I think it would be helpful it you expressed yourself more succinctly if you continue contributing to this forum, you do raise a point that has had me thinking for a while. Xero is designed on a platform that was state of the art in 2006. It is now 2013 and the wider environment has changed. Is the Xero platform what you would do if you were starting an accounting software business from scratch now? Will Xero be superseded by a better and cheaper way of doing things?

I have recently seem some of the new MYOB software and it is very powerful and easy to use and of course they have recently rolled in BankLink. Reckon are also doing some interesting things with ReckonOne. In some respects the "incumbents" as Rod likes to call them are now more advanced than Xero - because they started later.

I still maintain my line on Xero that it is a company doing many things very well but also facing strong and growing threats - both product and price wise.

[blobbles]

blobbles,, nice points, but we dont have what the user would call an accounting system.

as your last points, all good ... "Xero solution is more flexible".......

is it? :) :) :) :) :) ................

Well, maybe not more flexible, in that you can do anything you want. But in the long run, flexibility without reliability and trust, in an accounting system creates bigger nightmares.

[zs_cecil]

surfersteve is probably right that technology is easily outdated. This is completely true. Though, it is a little bit misleading if this is the reason why Xero will lose its advantage quickly. I think Xero is not only competing on its technology. It is reinventing the collaboration among accountant, users and developers which are the key players in its business ecosystem. Technology can be easily copied by competitors. Many new technologies are out there now a day. But the business ecosystem is way too hard to copy. It needs money, time, resources and of course technologies to shape a competitive business ecosystem. When Rob Dury keeps saying that the old desktop accounting software was outdated, I believe he was seeing that the collaboration among the accountant, users and developers are restricted by the outdated technology rather than the outdated technologies makes a bad account software. Simply creating/updating a software using latest technology is not enough to make a good accounting products. By saying this, I did not mean that the new way would make Xero success for sure. But at least we see Xero takes the leadership in creating more value together with accountants, customers and developers using its technology.

[zs_cecil]

zs cecil, letting a CPA create abstract tax accounting journals in any system effectively makes the transaction base tax toxic. Even if these journals are done with the disclaimer on the front and audited later by the society for the practice to get it stamp of compliance. This idea that you need to bring the accountant closer to the transaction base is really dangerous. In fact it would be safer the other way around. However if you wish to create sets of accounts that are tax adjusted in ways that the lay business man cannot understand does provide the CPA with a huge income stream. As a friend of mine said to me recently " if they knew what we really did we wouldn't be able to charge them anything"!!!

Your point is interesting. Could you explain a bit more on why this is dangerous?

I don't have any knowledge on accounting so I do not have the ability to identify what is dangerous in terms of the way to do accounting. What I understand is if you have an automatic transactional import in your accounting system, you can still control the level of shared information or modify the transactional data to fit what you need. The accountants process what the business owners give them rather than sneaking into the company's system and do there work.

[CJ]

Your point is interesting. Could you explain a bit more on why this is dangerous? I still have absolutely no idea what he is on about. He may have a point but he isn't making it very well.

[lastmoa]

XRO taking a big dive today. Looks like DIL isn't the only company suffering! Next stop is MA100 at $11.80.

Is nice to see DIL not going down in Sympathy with XRO. Still, can't see no reason, albeit profit taking, why Xero will go down still. Good reentry points coming up. imho. Think $11.80 is a bit ambitious, but we still do have till 1st August till AGM. Anything possible even if it makes no sense. 8-)

[CJ]

SurferSteve - and all that has nothing to do with the accounting system. The accounting system sole aim is to accurately record all transactions, whether real (ie cash changing hands) or notional (ie Journal entries between related parties).

I note that all notional transactions must be backed up with legal documents so the accounting system is only doing its job - recording the debits and credits.

Even your Bespoke record keeping system needs to record the legal transactions regardless of whether cash has changed hands.

[Shore]

jesus i'm going to need some heart medication at this rate

[lascar]

Price Enquiry into Xero
https://www.nzx.com/regulators/NZXR/announcements/238682

[CJ]

The bottom is not in yet, charts show the deathcross has arrived (50 MA below 200 MA). Hence the precipitous drop this morning as traders bailed. I'm beginning to quite like this stock as its a TA traders dream - entirely predictable! MIght even be enough to tempt me back in to the day traders game :-)It must be a great stock for Traders if you get it right, why trade for 1 or 2 cents on a normal stock when you can trader for 1 or 2 % in a part day with XRO.

[tosspot]

You can get 4-5% on this stock in a day.
its been a 10% swing today 14.50 now over $16

[comatose73]

KW, Just wondering if you could share what software you use for charting? thanks

[Lorne Ranger]

Thanks for the advice about the monitoring tools.

Do others agree with that or use other sites and software?

[Hoop]

Thanks for the advice about the monitoring tools.

Do others agree with that or use other sites and software?
Try big charts (20 minute delay)
http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=NZ%3axro&uf=0&type=4&size=4&sid=2731433&style=320&freq=6&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=3&rand=840169892&compidx=aaaaa%3a0&ma=3&maval=50%20200&lf=8&lf2=2&lf3=1&height=981&width=1045&mocktick=1

[Hoop]

It seems my 5 minute chart I posted (#2109) is updating itself....It has data to the end of today...but I posted it on ST 12.13pm
Lets see what happens tomorrow.

[Snow Leopard]

It seems my 5 minute chart I posted (#2109) is updating itself....It has data to the end of today...but I posted it on ST 12.13pm
Lets see what happens tomorrow.

Well you inserted a link to a webpage that dynamically generates a chart as opposed to copying an image. So I expect that further updates can be expected.

Best Wishes
Paper Tiger

[Hoop]

Well you inserted a link to a webpage that dynamically generates a chart as opposed to copying an image. So I expect that further updates can be expected.

Best Wishes
Paper Tiger

Hmmm this could be useful ...(pity about 20 minute delay)
Maybe create a thread with live charts
whata ya reckon PT.
The DIL chart is live too

[Snow Leopard]

Hmmm this could be useful ...(pity about 20 minute delay)
Maybe create a thread with live charts
whata ya reckon PT.
The DIL chart is live too

No, please no !

Best Wishes
Paper Tiger

[Snow Leopard]

Can I point out that as someone who makes technical decisions at the end of the day, that this recent blip has yet to trigger any sort of alarm.

4657

Best Wishes
Paper Tiger

[randoman]

Can I point out that as someone who makes technical decisions at the end of the day, that this recent blip has yet to trigger any sort of alarm.

4657

Best Wishes
Paper Tiger

What platform is that? It's purty...

[Snow Leopard]

Hi randoman

It is the one and only instance of TigerCharts which I wrote as a self-learning exercise way back in Oct 2008, when I had a little gap in my work schedule, and which I update occasionally.

It is Windows program written in C# and uses WPF (Windows Presentation Foundation) for the purty bit (User Interface).
All the stock data, which is scraped off the internet by various means is stored in a SQL Server database.

Best Wishes
Paper Tiger

[Hoop]

no, please no !

best wishes
paper tiger

ok...........:D :D

[winner69]

It seems my 5 minute chart I posted (#2109) is updating itself....It has data to the end of today...but I posted it on ST 12.13pm
Lets see what happens tomorrow.

Can you post tomorrows (or Mondays) chart today please

[Hoop]

Can you post tomorrows (or Mondays) chart today please
Got my mate Stephen Hawking working on it.....I'll keep you updated on any progress....

[lastmoa]

Xero article from stuff : http://www.stuff.co.nz/business/money/8942099/Has-Xero-reached-its-peak

[CJ]

id be really interested in knowing what it costs for them to grow there numbers..giventhei huge losses, it costs them quite a bit, BUT they are focusing on accounting practises.

So they don't just sign one customer, they sign all the customers of an accounting practise plus all thei future clients. It probably takes a few years to transition them all over.

Doesn't really answer you question - sorry.

[CJ]

thanks guru... i saw they had a 70 million term deposit on the balance sheet. Do they have any other cash assets or are they expecting to issue more shares to raise capital do you think?$70m should last them a few years. They will raise more capital rather than go into debt in my opinion, at least until they are profitable/cashflow positive - but then they wouldn't need to raise capital.

[CJ]

Finally agree with you Steve - Security is a concern. They haven't had any issues yet but that is no guarantee. The likes of Dropbox has already been hacked.

[blackcap]

Competition is arriving? (This thread has been very quiet for a while... strange)

http://www.stuff.co.nz/business/8963938/Xero-unruffled-by-unlikely-challenger-SAP

[forest]

[QUOTE=blackcap;418792]Competition is arriving? (This thread has been very quiet for a while... strange)

http://www.stuff.co.nz/business/8963938/Xero-unruffled-by-unlikely-challenger-SAP[/QUOTEAs companies grow, it is inevitable some will shift off the platform. Xero itself has grown too large for its own software and now uses cloud-based software from Netsuite

This shows that there are limits to Xeros usefulness. Observing the resent rise in XRO share price I wonder if holders are aware of this.

[CJ]

This shows that there are limits to Xeros usefulness. Observing the resent rise in XRO share price I wonder if holders are aware of this.XRO is far too big to be using its own software it targets the SME market. The definition of that, in NZ at least, is very small. Anything over $10m or with multiple cost/revenue centres is not their target market.

Edit: MED defines an SME as less than 20 FTE employees. http://www.med.govt.nz/business/business-growth-internationalisation/pdf-docs-library/small-and-medium-sized-enterprises/structure-and-dynamics-2011.pdf

[forest]

CJ I thought a company like XRO might make accounting software for their own use and learn some lessons along the way. Those lessons learned could come useful later when their uses expand their business.

This is obviously not how this industry works.

[Cricketfan]

CJ I thought a company like XRO might make accounting software for their own use and learn some lessons along the way. Those lessons learned could come useful later when their uses expand their business.

This is obviously not how this industry works.

I find it a bit strange that they don't use their own software. You'd think that the costs involved in enhancing their software to do that would be offset by the money saved by not paying an external company, and also the additional customers they could sell their product to. I guess there must be a huge jump between the SME market and enterprise level stuff.

[Stranger_Danger]

[QUOTE=blackcap;418792]Competition is arriving? (This thread has been very quiet for a while... strange)

http://www.stuff.co.nz/business/8963938/Xero-unruffled-by-unlikely-challenger-SAP[/QUOTEAs companies grow, it is inevitable some will shift off the platform. Xero itself has grown too large for its own software and now uses cloud-based software from Netsuite

This shows that there are limits to Xeros usefulness. Observing the resent rise in XRO share price I wonder if holders are aware of this.

Since Xero's revenue is all monthly recurring billing, I would have thought they'd have very basic accounting needs. Virtually no inventory, no debt, tidy capital structure, essentially a one product company. Accounting should be straight forward for a business of 40 million in sales, which is not traditionally considered a large business, market cap excepted, of course?

The only complexity I can see is multi currency, which Xero handles.

So, where is the complexity and how have they outgrown their software so fast?

[Stranger_Danger]

XRO is far too big to be using its own software it targets the SME market. The definition of that, in NZ at least, is very small. Anything over $10m or with multiple cost/revenue centres is not their target market.

Edit: MED defines an SME as less than 20 FTE employees. http://www.med.govt.nz/business/business-growth-internationalisation/pdf-docs-library/small-and-medium-sized-enterprises/structure-and-dynamics-2011.pdf

Number of employees has far more to do with the payroll system. In the accounting system, each payroll category tends to be a one liner, regardless of employee numbers.

Either way, it should make limited difference to the complexity of the accounting needs.

As I say, with monthly recurring billing for essentially a single product company, the accounting shouldn't be hard.

Unless the system slows to a crawl or simply doesn't support, past a certain transaction volume? (anyone know?)

[CJ]

150,000 customers/deposits each month growing to 1m+. Staff in at least 4 countries.

You can't design software to cater for the self employed plumber though to a full ERP system for a large multinational.

They are focusing on SME (I personally feel MED defn is too small but up to say 150 FTE depending on type of business). They are much much bigger than that.

[Stranger_Danger]

CJ,

Yes, but 150,000 very repetitive, regular payments each month. The only complexity there being multi currency, which they handle.

Staff in 4 countries not relevant - apart from Australia, they don't do payroll, so they're presumably using other systems. We're talking the core accounting here.

Computers are meant to be good at automating the regular - in terms of complexity, a retail shop with 3,000 stock items and a couple million dollars of sales should be harder to automate in an accounting system that 150,000 transactions that are recurring revenue billings.

Unless it just doesn't handle big volumes.

Or there is something we're missing?

[warthog]

I find it a bit strange that they don't use their own software. You'd think that the costs involved in enhancing their software to do that would be offset by the money saved by not paying an external company, and also the additional customers they could sell their product to. I guess there must be a huge jump between the SME market and enterprise level stuff.

Seriously, this type of reaction indicates a significant lack of understanding of the product. It is like saying that a company that makes hand-shovels save themselves some money and use their own shovels for large-scale earthworks instead of using excavators, etc. And for those who think that hand-shovel makers, relatively new to the market, should launch into excavators, the hog would suggest you have never run a business.

[warthog]

You can't design software to cater for the self employed plumber though to a full ERP system for a large multinational.

That's well-put, CJ.

[warthog]

CJ,

Yes, but 150,000 very repetitive, regular payments each month. The only complexity there being multi currency, which they handle.

Staff in 4 countries not relevant - apart from Australia, they don't do payroll, so they're presumably using other systems. We're talking the core accounting here.

Computers are meant to be good at automating the regular - in terms of complexity, a retail shop with 3,000 stock items and a couple million dollars of sales should be harder to automate in an accounting system that 150,000 transactions that are recurring revenue billings.

Unless it just doesn't handle big volumes.

Or there is something we're missing?

Yes, there is, and it's something big: SME accounting is a different proposition to corporate, multi-juristiction accounting. Some similarities, yes, but not as much as you are speculating exist.

It always amuses the hog when somebody suggests (not you Stranger Danger) that a lawyer who works in banking might be able to help out with an immigration case, or tax-planning, etc. After all, they're all lawyers aren't they!

[Cricketfan]

Seriously, this type of reaction indicates a significant lack of understanding of the product. It is like saying that a company that makes hand-shovels save themselves some money and use their own shovels for large-scale earthworks instead of using excavators, etc. And for those who think that hand-shovel makers, relatively new to the market, should launch into excavators, the hog would suggest you have never run a business.

Hardly a fair analogy. Xero are in the software business. They can develop an enterprise solution using the same type of tools and skills as they use now - unlike a company manufacturing hand-shovels who would need radically different tools and skills to make excavators. It would take Xero time to develop that solution, but what I was saying is that that cost would be partially offset by them using it themselves and thereby saving licencing costs going to another provider.

[CJ]

Hardly a fair analogy. Xero are in the software business. They can develop an enterprise solution using the same type of tools and skills as they use now - .but that would create even bigger losses as they established. They are focusing on their target market which is a good thing.

[CJ]

CJ, if Xero focus on SME market and do a good job ... they will have a huge market.Exactly.

There is no need to try and target the large end of the market as well.

I note that they are continually improving their product. While some companies will grow out of XRO, some will grow at the same pace. I note today that purchase orders are due to be released by the end of the year. Nothing and I mean nothing in the organisation I work for gets paid for without a PO Number. We are at the extreme end of the size scale so use SAP but at some point, smaller business will grow to a stage where they require PO as well. Quotes are also being worked on and I am surprised they haven't rolled this out yet as they are important for many small businesses - to date they would have to rely on a add on and suffer the extra cost.

[Shore]

Yeah... CJ... did you catch that...

[CJ]

Yeah... CJ... did you catch that...I'm just happy hes stopped calling me Guru, even if he doesn't capitalise my initials. ;)

[CJ]

Since some of you are a bit confused about why XRO doesn't use its own software, I got Forbes to write a quick article about teir 1 and teir 2 products ;)

www.forbes.com/sites/quickerbettertech/2013/07/29/are-cloud-based-accounting-apps-ready-for-prime-time-5-things-you-should-know

[CJ]

your average management team hasn't got a clue what the technologies can actually do Xero is targeting the small end of the market. There isn't necessarily a "management team", there is the owner operator or the owner manager. Sure they could get a desktop product hosted in the cloud or they could go to a one stop shop, like Xero, who bundle the two together for a full SaaS solution. I dont know what their typical user is so I can only use the ones I am aware of:

2 x cashbook - rental property company and share investing company. Could do in excel but for $120+GST a year, I value the time saved at more than this.
1 x full - Brothers business - one owner operator with 20 front line staff. Between my brother, me and his wife, we keep this up to date. Previoulsy they were doing more work (MYOB) plus paying their accountant $5k. If they got an accountant to do my role, they would probably charge $250pm ($3k which includes software costs)

Agree once you get to the next level, you may find a cloud product does not have all the features required (full ERP) so go for a desktop solution, either hosted on your server or via a cloud provider.

[Toasty]

@surfersteve. Um. I work at an accounting firm and its not so much that we are ignorant of technology and we want to keep our clients in the stone age. Its more that we are not programmers and developers and want to make sure that our clients have stable and proven platforms to manage their data etc. Cloud based applications have finally moved into that realm of trustworthiness and offer many advantages over the previous desktop and paper based systems that were the staple for so many years.

I am sure that you know what you are talking about and that you see the advantages of the systems that you are proposing, however I do not, as I don't really understand one word you are saying. And in general our clients are even further away from understanding the technology available.

The other thing is that we are not pushing the aspect of tax and compliance accounting on our clients as we know that they can meet most of these obligations themselves if they chose to make the effort. We are more about helping them to use the information that they have available to them now in real time to drive smarter business decisions. "Added value services" to use an industry buzzword.

If you are selling something you may need to get a marketer to put it in terms that your potential customer base will understand. I had to look up Abstract Accounting and I still don't really know where you are heading with this.

Does any of this have any actual bearing on the Xero share price?

[pierre]

Good call Toasty.

I'm not an accountant, but I do the accounting for two businesses that I own. I use our accountant for tax and general business advice.

Fortunately, he speaks in English, not in Tongues as Surfer Steve does, and I can understand and action the advice received.

I certainly hope that Steve isn't selling something as I fear that his cash register will remain deathly silent until his technical jargon can be made intelligible - but then maybe his target market is more in the guru range and not the sphere that I operate in.

[Lorne Ranger]

Any predictions for the AGM tomorrow?

[Toasty]

Any predictions for the AGM tomorrow?

Customer numbers will be close but not quite at the doubling that everyone has come to expect. I reckon good movement in Australia and US, but US is off a low base so won't add much to the total picture.

Big plans for next couple of years around marketing into the US.

[CJ]

Any predictions for the AGM tomorrow?As topasty said, the interesting thing will be customer numbers. Start of new financial year in NZ is 1 April so they should have picked up a few in the last quarter. Dont expect much growth in Australia as they year end is June, unless they count new signups in July. Having said that, they have signed up Deloitte so we may see some of the benefit of that deal.

NZ and Australia already have good penetration so as long as growth continues, that will be seen as positive. The real biggy in the US and how their marketing efforts over there are going.

[Schrodinger]

Xero is all about the sales numbers. If they dissapoint expect a large drop in price...

[CJ]

Xero is all about the sales numbers. If they disappoint expect a large drop in price...True, but given how quickly their share price has risen, what sort of numbers are expected, and what sort of numbers are required for a large increase?

[CJ]

Could be good for Xero if Rod takes out the top prize. We all know Rod is great at taking advantage of any free advertising so this would get the Xero name out even wider.

[Schrodinger]

True, but given how quickly their share price has risen, what sort of numbers are expected, and what sort of numbers are required for a large increase?

Ideally, a doubling of annual revenue or in other words a 100% increase compared to the same quarter last year. I will watch with interest.

[Shore]

Does anyone know how many customers they added in the same quarter last year?

[hammer&nail]

Could be good for Xero if Rod takes out the top prize. We all know Rod is great at taking advantage of any free advertising so this would get the Xero name out even wider.

CJ it may pay to be focusing on the quantitative aspect of the business rather than silly awards as a means to pump the name and thus share price.

[CJ]

CJ it may pay to be focusing on the quantitative aspect of the business rather than silly awards as a means to pump the name and thus share price.wheres the fun in that!

I was actually refering to new sales rather than new buyers of shares. "EY awards Xero accounting software founder" will be a hand line should anybody be sitting on the fence. That is, it validates the company as a serious player in the market (global market should they win the global award).

Disc: not a holder so no pumping from me.

[baller18]

hmm... down 6.1%, time to make a quick buck??

[Toasty]

wheres the fun in that!

I was actually refering to new sales rather than new buyers of shares. "EY awards Xero accounting software founder" will be a hand line should anybody be sitting on the fence. That is, it validates the company as a serious player in the market (global market should they win the global award).

Disc: not a holder so no pumping from me.

I agree CJ. Anything that encourages a customer to make the decision to sign on with Xero is a plus in my book. Those customers signing on and generating revenue should be the trigger for the rising share price.

I would be unhappier if the share price was rising solely on the back of awards being won.

Disc: A shareholder so lots of pumping from me...

[Toasty]

Hey guys, can anyone give me a quick response as to whether my partner can attend the XRO AGM with me today? The shares we own are under my name only.

Appreciate the help (will give Xero a call if no one replies).

Cheers.

I couldn't tell you the official position but I would be surprised if they didn't let you both in. There is usually plenty of room. They let the shareholders sit first and then the Xero minions fill up the rest of the seats. Rods always meeting and greeting so just tell him you are both going in and theres nothing he can do about it.

[Toasty]

Might see you there. Just yell out for Toasty!

[zs_cecil]

I wonder if anyone sitting in the AGM meeting would be holding his cellphone and getting ready to hit the Buy/Sell button anytime. :)
Is there any update from AGM yet?

[CJ]

193000 up 36k since last disclosure

Expect revenue to be up 80%

Edit: Link - http://www.sharechat.co.nz/article/270c06d0/xero-adds-another-36k-customers-since-march-sees-80-percent-lift-in-2014-sales-wider-loss.html

[Shore]

I think all in all that's pretty good since they've get to hit that turning point in their two biggest markets (UK & US) like they've done in NZ & Australia. Signs are looking good - but I think the next 12 months will be important in terms of what traction they can get in those markets.

[zs_cecil]

The high level product roadmap is interesting. It indicates that Xero will target more countries in 2014 and add more language support in 2015. It is an aggressive timeline because the US market is yet to be successful. Obviously, Rod Dury seems very confident in the US/UK market development in the current financial year.

[artemis]

Cheers. Yeah I rang Xero and they didnt really know (the person that does know is already over at Te Papa). They said my partner should be able to attend as a ""visitor". So will see. Apparently it is going to be pretty full (and the Soundings theatre is way bigger than the venue last year so should be fun!)

Yes Soundings Theatre was pretty full. Rod was meeting and greeting on the way in, and joked that next year the AGM would be in the Stadium. Rod was quite blokey in his presentation, though he was one of only a couple at the top table wearing a tie. One funny thing - he made a throwaway remark the Xero were killing MYOB in Oz, and Craig Winkler gave a bit of a wry smile. (He's a Xero director but in a previous life was one of the MYOB co-founders.)

[Toasty]

Was a good meeting. All the Xero meetings have been good. Rods speech is always a highlight for me and he is a hell of a salesman. He has a charismatic style of presenting and throws in jokes and things. At one point you could hear his phone buzzing on the table and he looks at it and says "Well it can't be mum because shes here..".

Thats aside, I thought the numbers looked good. I was hoping for 200k customers but I have to admit that I was quite surprised they got as close as they had at 193k. It certainly looks plausible and there were some nifty features due for release in the next few versions.

The US this year will be the big question though so I will be watching closely although it sounds like they have signs of life in the UK.

[False Profit]

so... predictions for a jump in share price at early trading?

[winner69]

Yes Soundings Theatre was pretty full. Rod was meeting and greeting on the way in, and joked that next year the AGM would be in the Stadium. Rod was quite blokey in his presentation, though he was one of only a couple at the top table wearing a tie.

Nice call - brings back memories of the good old days in the mid 80's and the huge turnouts to idolise Brierley et al

about 5000 went to see superstar Ron in 1987 ... have a photo somewhere ... amazing stuff .... Rod might get 5000 at the stadium

Just jealous I didn't get an invite to yesterdays meeting

[winner69]

Mr Harrison just doesn't get it
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10906813

Firm's slowing income growth means share price cannot be justified, says fund manager

[Schrodinger]

I kind of agree with the fund manager. However, are the latest figures just a settling period for the US push? Given that Xero operates in a short window i.e. greenfield technology with a jump on the competition the sales numbers need to reflect that. The US is a different proposition to Aus and I dont expect them to pick up customers as quickly as Aus.

If this slowing in sales occurs in the next period that would be highly concerning.

[False Profit]

He knows the score. By spreading a little grease on the ladder he's hoping to buy on the dip before the price hits tsunami levels. Little monkey.

[Stranger_Danger]

Mr Harrison just doesn't get it
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10906813

Firm's slowing income growth means share price cannot be justified, says fund manager

The bit that worried me from the release was the chart showing salesforce, workday et al, and their market caps.

The inference seemed to be "Xero is undervalued".

I remember the exact same thing in 1999 - everything was "undervalued" in comparison with something else. Price/Sales ratio of 50? No problem - look mum, that other company in the USA has a P/S of 100! Buy, buy, buy!

That said though, they're executing really well and ultimately, they can't control investor emotions or the price people are willing to pay.

[CJ]

The bit that worried me from the release was the chart showing salesforce, workday et al, and their market caps.

The inference seemed to be "Xero is undervalued".I dont think that was the purpose though may be a by product. It was meant to show that it takes a while to earn the first $20m, but to get to $100m (5x as much), it takes a short period. ie. trust the Growth model they are pursuing.

[Lorne Ranger]

I thought Rod did a good job of giving a Xero snapshot, as well as indicating the direction (and challenges) of future growth. I enjoy his off-the-cuff style and it engenders a bit more trust from me than a starched up plutocrat playing it safe. There was much to encourage investors I believe in medium to long term growth. I think their timing is about right in terms of sustainable growth, NZ is ablaze but will only burn for another year or two before starting to level off, so Australia needs to come on line and take off in the next 12-24 months to take over, in time for the UK and US market to come around. Seems a measured plan to my thinking. So I agree that quarter by quarter reports may in future not tell the whole story, as given the scale of the UK and especially US market, catching fire there could easily double revenue in a single quarter.

As he also mentioned, competition is not a great concern, at least in NZ, Aus and US. Xero have come a long way in short period, and it is not easy to duplicate that any quicker for a competitor. Rod also expressed the difficulty in finding the right staff a problem (and a risk in his words), but this also reflects his long term vision and patient approach to not rushing to mediocrity.

Revenue up only 80%? Oh dear. I'm not too worried about that, though of course it is noted, but with the context of where Xero are at and where they are clearly heading it seems a good result. One comment i thought particularly interesting was that Xero has been operating "with the brakes on" for a while during a period of completing other essential services and improvements (such as better banking integration and reporting schema for accountants). True their increase in staff should be able to cope with that, but along with the development of a suite of applications, that can be used by a range of staff within an organsation rather than just the finance team (such as project planning etc), they are clearly not only out there selling Xero accounting solutions, but also developing product that can increase the yield from existing and loyal customers.

It adds up to a good medium to long term prospect, and I really got that sense of time and scale. So while those in for a quick buck might see the headlines and get the shakes, the presentation strengthened my belief that Xero is an astonishingly good prospect for my future retirement!!

[lastmoa]

Mr Harrison just doesn't get it
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10906813

Firm's slowing income growth means share price cannot be justified, says fund manager

Always amazes me how these analysts feel they can comment on something they cannot fathom, and get it published.
There are sure lots of bashers out there, possibly carrying regret. It sure is exciting knowing what can be achieved if Xero does execute as planned, globally. Damn exciting.

I attended the AGM and got to speak to Rod and Craig afterwards. They are ticking all the boxes for me. Great team and I was pleased with the results released. They sure seem to be blurring the lines between banking and accounting for SMB. Disruptive.

[artemis]

Good article in today's Herald by Brian Gaynor on the Xero AGM - the way it was run and some key points. Interesting that Rod Drury spoke for almost an hour - sure didn't seem like that long.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10907439

[Toasty]

Ajax and Jquery and javascript in the browser has allowed a GUI to be created in the browser providing a GUI control experiance for the user. And the standard SQl backend of xero ("if thats what it is") does allow them to develop other GUI solutons for the coming age of Fibre. The user (SME person) does not care that they are using the html and java script Jquery mess that is the abortion of the modern browser. As long as they can do there invoices cheaply and dont have to learn anything about computing they are happy. ROD knows that he only has to talk to the masses like milk the cow.

I'm still not following your point. Of course the "masses" don't care about whatever it is that you have written about here because not everyone is a programmer. What they are getting is a vastly better system than any accounting package before it. Perhaps not because it is the latest cutting edge fringe technology that no one except some socially challenged back room techo has ever heard of but because it has been made easy to use and understandable to the "masses".

As for "milking the cow" that sounds derogatory...I think. How is it unfair to charge a fair price for a product that makes accounting easier to understand and provides business owners more time to concentrate on the portions of their business that actually deliver value...like selling stuff. I am not only approaching this as a shareholder but working for a firm of accountants and business advisors gives me a chance to see this in action. People who previously avoided their admin like the plague actually look forward to it because it is providing real time feedback.

You seem to run hot and cold in your opinions and I am still not sure of your point.

[comatose73]

"one except some socially challenged back room techo " , are you refering to me Toasty? I must let my blonde ballroom partner know that im "socially what?"

Mate, when you're in a hole, stop digging....

[Toasty]

"one except some socially challenged back room techo " , are you refering to me Toasty? I must let my blonde ballroom partner know that im "socially what?"

Actually I wasn't referring to you specifically but trying to make the point that history is littered with better technological solutions that were slayed by better marketing or by making themselves more accessible to the market. Betamax vs VHS, PCs vs mac, there are probably more but I'm not claiming to be an expert.

[Stranger_Danger]

What I think surfersteve's main point is that the idea of running complex applications inside a web browser, when considering the way the initial foundations were put up, the nature of the browser etc etc, is actually totally nuts.

Web applications require a number of technical sacrifices and compromises, and if anyone knew what the "early internet" would have led to, they would have done a whole lot of things differently!

Basically, mission critical complex apps are now being built on the shakiest of foundations, utilising an infrastructure that was designed for open, non paid, insecure communications, not for the core technology infrastructure that has been plonked on top of it all, stuff that we'd struggle to run businesses and function without.

All of that said, it is all a moot point because that is the way things have gone : that is the market reality.

I think surfersteve's point is that like every previous technology prior, a lot of it may prove to be transitional, which I think is a fair bet.

Correct me if I'm wrong, surfersteve.

[maddog]

Thank you Stranger Danger - you appear to have successfully translated Surfer Steve into language that I understand!

This issue of the robustness and appropriateness of Xero's platform is a very important issue. Is it a strength or is it a weakness?

[maddog]

Many years ago I used to occasionally play the board game Risk with my university mates. The games would go on for hours and hours because as soon as anyone got into a dominant position they would try and take over the world to win the game. This would invariably stretch that person's resources and attention so much they would leave a weak point for someone else to exploit and attack. As soon as that happened someone else would attack somewhere else and very quickly the person who had been in the strong position was overrun by everyone else. Then the cycle would begin again as another player would dominate, expand, get stretched and then get broken

I was reminded of this earlier today when I read a comment posted on LinkedIn from the UK:

http://www.linkedin.com/groups/Has-anyone-else-noticed-error-1415817.S.261835623?qid=3c789bf2-6b9a-4ff2-a80c-164b52a49cfb&trk=group_most_popular-0-b-ttl&goback=%2Enmp_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1%2Egmp_ 1415817

Xero has been in the UK since I think 2008, yet does not seem to have attended to some basic VAT functionality. The comments are hard-hitting and well worth reading.

Is this a sign that Xero's focus on the US market is stretching its resources elsewhere? Is it trying to do much, too quick? Will similar issues arise in other markets?

I don't know the answers to those questions but the management of rapid growth and expansion into new markets is never easy and will be a real challenge for Xero.

[Toasty]

Gary Turner from Xero did have the last comment however and did say that they were working on it.

[Shore]

Many years ago I used to occasionally play the board game Risk with my university mates. The games would go on for hours and hours because as soon as anyone got into a dominant position they would try and take over the world to win the game. This would invariably stretch that person's resources and attention so much they would leave a weak point for someone else to exploit and attack. As soon as that happened someone else would attack somewhere else and very quickly the person who had been in the strong position was overrun by everyone else. Then the cycle would begin again as another player would dominate, expand, get stretched and then get broken

If this is true across the board, why hasn't eBay or TradeMe being supplanted? Point is - every business model is different. Cloud accounting is new, it's untested, and we're about to find out what being a 1st mover really means in this particular market.

EDIT - I re-read your full post on previous page and can see my reply wasn't quite addressing your point.

[maddog]

Shore - eBay and Trademe have not been supplanted because there is a benefit to the wider market in having a common shared platform.

Accounting is not like that. While there have always been systems of use to a sizeable chunk of the market (MYOB, QuickBooks and Sage are good example) there are also many niches with specific accounting requirements and also many different markets with specific tax requirements. There will never be an accounting market dominated by just one software provider.

Turmeric - I have no doubt that Xero has good people at the top. My point was that the wider you expand the greater the risk of cracks appearing. And those cracks appear not at the top but around the edges. The discussion I linked to from the UK is an example of that. Gary Turner seems to have acted on it once it got attention in public but it seems UK accountants have been quietly drawing Xero's attention to it for a year or so and got no traction. Their perception was that resources were being allocated elsewhere and not being allocated to dealing with their issues. These comments were worrying - and it is certainly not the first time I have seen this sort of grumbling. These are the cracks Xero has to attend to - otherwise as it expands there will be more of them.

It is easy to listen to the hype and believe Xero really is different but it is the reality of what customers like and dislike (and whether or not the business generates cash flow) that ultimately determines the success of a company.

[Everwood]

There is an article written in the nbr today with the title "Xero’s assault - analyst raises small red flag" I would appreciate it if someone could give me brief overview what was actually said in the article.

[Xerof]

Due to copyright, check your PM box

[maddog]

The NBR article quoted Woodward Partners Nick Lewis who said he remained bullish on Xero but noted the red flag that Intuit will aggressively fight Xero in the US market - and noted they have scheduled an event at the same time as the first XeroCon in the States. It also commented on the launch of Intuits QuickBooks Online in Australia.

The article also noted that as an alternative strategy Intuit had the potential to buy Xero.

[CJ]

The NBR article quoted Woodward Partners Nick Lewis who said he remained bullish on Xero but noted the red flag that Intuit will aggressively fight Xero in the US market - and noted they have scheduled an event at the same time as the first XeroCon in the States. It also commented on the launch of Intuits QuickBooks Online in Australia.True, but Xero only need to get (say) 5% market share to be hitting some very serious numbers. If they were to overtake Intuit, there will be some seriously happy shareholders.

[Shore]

Well to be honest that's hardly a red flag that nobody knows about... least of all Xero themselves. They are up against decade old, ingrained incumbents in every market they launch to - I mean they were up against a very, very well known and respected brand in MYOB in Australia and they are beating to a pulp there.. so.. hopefully more of the same in the US.

The difference to me is that Xero seem to be riding a wave of change that is mirroring the new breed of accountancy practices coming through... MYOB and Intuit etc all have that bloated desktop software stigma and is going to be very hard for them to shake off in the face of a crisp new challenger like Xero.

[maddog]

Turmeric

There are frustrations amongst some Xero users and accountants - the link I posted earlier is one example. Xero has genuine issues with the quality of its data feeds - duplications and omissions occur much more frequently than they should. If you go and read the Xero user groups on line there are plenty of issues. It is not the perfect world that Xero likes to portray in its briefings.

What also happens with software is that as it gets more complicated (as Xero most definitely is) its gets harder to test, more interactions occur between one piece of code and another, and more issues crop up more regularly. This is the bane of every software product ever built.

And as Xero expands into new (and in the case of the USA more complex) markets the potential for design errors that affect local functionality also increase.

The point I have been making today is that it is extremely difficult to avoid an increase in such cracks as a software business expands. It is likely you will see and hear more whinges about functionality and performance in coming years. However, If Xero can successfully counter these issues it deserves every success it achieves.

[Stranger_Danger]

Stranger danger lifted the skirt and the legs arnt pretty.

Story of my life. I really need to drink less when I go out.

[Toasty]

Another little announcement that went under the radar...well my radar anyway. Surely if all these partnerships yield a small percentage of their client base as customers then this has to bode well for the growth of Xeros customer base.

http://www.accountingtoday.com/accounting-technology/news/Xero-Inks-Data-Sync-Deal-with-ConnectWise67634-1.html

I did read somewhere that the US customer numbers were growing very quickly as well but I can't find the snippet.

[maddog]

Toasty

There was a comment in Rod's CEO's address at the AGM where he commented that year one growth in the USA exceeds other countries for customers and partners. That is what you would expect as the USA is bigger than the other three markets and Xero now has more resources to put into market development.

The last reported numbers in the USA were still very small and Rid avoided giving a specific number when last asked - I think by NBR.

[Toasty]

Toasty

There was a comment in Rod's CEO's address at the AGM where he commented that year one growth in the USA exceeds other countries for customers and partners. That is what you would expect as the USA is bigger than the other three markets and Xero now has more resources to put into market development.

The last reported numbers in the USA were still very small and Rid avoided giving a specific number when last asked - I think by NBR.

Thanks Maddog. That seems like a significant piece of information to me. I would have hoped they would have made more out of it but maybe they are saving the info until they are sure that the growth is sustainable or the numbers become large enough to make some noise about?

[Toasty]

the long term problems i see with these technology platforms is the weather the development community can solve the massive cost involved in using these technologies that were never ment to use used for the job and are being sledge hammered into place. The business users just cant see or image how big a problem this really is.

If the business users can't see the problem then doesn't this just suggest that the developers have a handle on it. I can imagine that the platforms aren't as good as they could be from a developers perspective. There is always a better way to do things. Given that most of the Internet is hanging off our current platform I can't believe that its that big a deal. And if there is something better then it would have to be phased in.

I can't see that the vast invested interests around the world would take kindly to a new standard that completely derails current operation? Not saying it couldn't happen. Just not likely...

[Stranger_Danger]

If the business users can't see the problem then doesn't this just suggest that the developers have a handle on it. I can imagine that the platforms aren't as good as they could be from a developers perspective. .

They might not be able to see the problem on the screen in front of them. But the fact many SaaS products are more expensive, growing like wildfire, yet bleeding cash, suggests there is a lot that people aren't seeing.

I'm not being hard or cynical here - when you're promised "profits tomorrow", especially in a new industry, it is basically impossible to know whether it will happen.

I remember laughing at 100's of tech stocks in 1999 - they went to zero.

I remember laughing at Amazon and calling it the Unicef of books, along with others.

It survived to laugh at me, became huge, is making new highs - but still doesn't really make money.

A lot of people are looking at SaaS revenues, then looking backwards at installed software profit margins, adding the fact they have committed monthly revenue, then extrapolating a long term profit margin higher than the historical installed software margin.

Will it happen? I don't know.

In 2006 in the USA, if you looked at the last 20 years mortgage defaults and used that to extrapolate the next 5 years, you were in big trouble. All the numbers looked fine - but data based on an old business model (prime mortgages, in a sane housing market, with risk retained by the lender) was ZERO help in predicting a business based on a new business model (crappy, corrupt mortgages, lent on insane terms to people who couldn't pay at the peak of a boom, then sliced and diced and offloaded to unknowing idiots).

What will these businesses earn? Are there problems hiding in amongst the fact that they're not earning?

I don't have the answers - for all I know, Xero will be earning billions in 10 years. But it worries me when nobody wants to ask the questions. And it worries me when the past is used to predict the future, whilst simultaneously claiming a new paradigm.

[maddog]

Turmeric - I'm not sure what you're getting at.

All I did was answer Toasty's question about US customer numbers as best I could. I referred Toasty to the comments in the CEO's Address to last week's AGM where he said in his section on the USA that "Year one growth exceeds other countries for customers and partners".

I also made a simple reference to the article in last week's NBR where there was commentary on numbers but no specifics were given for the US. That NBR article said: "At its last detailed breakdown of customer numbers, Xero said had 11,000 of its 157,000 customers in the US and the rest of the world outside its key markets of Australasia and the UK. (Yesterday, Xero said its total paying customer count increased in 193,000 over the past three months, but did not go beyond the headline figure - it's natural to wonder if there's a US slowdown or Xero is holding back a number for an upside surprise at XeroCon SF."

I agree with you that Xero should reveal such information in proper market notifications. Though like Chris Keall of NBR I did wonder why they released the headline figure of 193,000 last week but did not break it down into market segments, it seemed a good opportunity to do so and would have been of real interest to the wider market.

[Shore]

If you want to find an article that goes some way to explaining investor mentality (particularly from a USA stand point) and why Xero is valued at what it is, then this article is a great read.

http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/

[lastmoa]

If you want to find an article that goes some way to explaining investor mentality (particularly from a USA stand point) and why Xero is valued at what it is, then this article is a great read.

http://abovethecrowd.com/2011/05/24/all-revenue-is-not-created-equal-the-keys-to-the-10x-revenue-club/

Thx Shore. Have saved link to read. Yes, important for the coys that NZ/Aust investors have little graps of, to get USA viewpoint.
regards

[baller18]

How come XRO has been slipping of late?

[CJ]

How come XRO has been slipping of late?Article in the Hardcopy NBR saying Intuit are attacking them in the US. I havent managed to track down my organisations copy yet so not exactly sure what it says but it may be scaring of some of the US hype until more figures are released.

The customer numbers released at the AGM were good but they weren't great so do expect it to drift till new news is out, especially, their US push which we wont really see the results of till next year.

Link to the "in this weeks NBR" article: http://www.nbr.co.nz/article/botulism-scares-ripple-effect-brian-henrys-manipulation-defence-xero-rivals-ambush-and-helen

Quote:
Digital editor Chris Keall details how Nasdaq-listed company Intuit is pushing back against Xero’s attempts to gain a foothold in the lucrative United States market, in what chief executive Rod Drury is calling an “ambush”.

[baller18]

Thanks moosie & CJ, lets see those funds pour into DIl :)

[Toasty]

Just put a friend of mine a builder on Xero. So toasty hold this stock. Just becuase i know the weakness of a technology doesnt not mean i wont move my friends onto the platform if i think it will suite them. If a business is small and the business does not understand anything about what they are using i will push them on to it with the caveat buyer beware..later i may move them off with a technology runtime we own if they need more power or intergate our runtime to the data source to help them if required. Xero will be one of platforms our runtime will provide interconnections to.

Thanks SS. That gets us to 193001 customers. I will continue to hold.

I believe that the software does help small businesses be more efficient but I can appreciate that there may be better underlying technology down the track. My hope would be that Xero would be able to adapt their service as this becomes available or more mainstream.

[lastmoa]

The Xero drop today way down to $15.55 was on the back of a pitiful volume. Just highlights the volatility up/down that can occur. Just gives some of us top-up opportunities.
The NBR link you supplied, CJ, didn't really say anything in depth. Of course Intuit will try to discredit Xero and Xero's defence should be in its product offering. Intuit is in the position of defendiing their position and Xero is in the position of nibbling on them whilst being nimble.
No small wonder they are closely watching Xero's rollout.
Agree the customer numbers were good, but maybe not quite enough for some less patient investors. Patience will be rewarded, imho.

[Shore]

At this stage in the game it's only Xero who benefits from this constant talk about Intuit and duelling conferences etc... Xero has next to nothing in terms of revenue coming out of the USA and you have the biggest player there constantly mentioned in the same breath. Just imagine what would happen if Xero starts getting traction...

[lastmoa]

At this stage in the game it's only Xero who benefits from this constant talk about Intuit and duelling conferences etc... Xero has next to nothing in terms of revenue coming out of the USA and you have the biggest player there constantly mentioned in the same breath. Just imagine what would happen if Xero starts getting traction...

Well said, Shore.
All Xero ever aimed at was a few % of the US market - let the games begin. Interesting times ahead.

[CJ]

The NBR link you supplied, CJ, didn't really say anything in depth. Of course Intuit will try to discredit Xero and Xero's defence should be in its product offering. Intuit is in the position of defendiing their position and Xero is in the position of nibbling on them whilst being nimble.
No small wonder they are closely watching Xero's rollout.That link is an article which refers to another article only available in the hard copy NBR. Dont expect there to be much to it though

[robbo24]

a lot of growth is alrwady priced in. any weakness and she slips.

By your calculations, how many decades of growth are priced in already?

[BDL]

Does Xreo use cloud data storage servers in the USA? I am reading people are moving away from data storage on USA servers because of privacy issues after all the news about the NSA spying around the world. Will people be cautious of all cloud based software in the future unless privacy can be assured somehow?

http://www.bbc.co.uk/news/world-us-canada-23627656

[CJ]

Does Xreo use cloud data storage servers in the USA? I am reading people are moving away from data storage on USA servers because of privacy issues after all the news about the NSA spying around the world. Will people be cautious of all cloud based software in the future unless privacy can be assured somehow?

http://www.bbc.co.uk/news/world-us-canada-23627656they use Rackspace in the US.

If this became a real issue, they could change supplier.

[lastmoa]

they use Rackspace in the US.

If this became a real issue, they could change supplier.

Rackspace is also looking at rolling out to Australia which I am sure Xero is following.
Do not see cloud storage hosting geographics as a show-stopper.

[CJ]

(off topic)suggestion: link (www.geekzone.co.nz) ;)

[keeny]

suggestion: link (http://www.geekzone.co.nz) ;)

Indeed. I suspect that forum would correct most of the jargon he's mashing together though. Sometimes it reads like the equivalent of "My cars brakes were spongy, so I asked the mechanic to look at the CV joint. In the end it turned out to be the windscreen wipers causing the loss of horsepower."

[CJ]

With XRO drifting lower, is there anybody who sold out now looking for an re-entry point?

I sold out far to early but I think I would want to see traction in the US before looking at it again - the current price could be justified but without that detail, impossible to tell.

[Shore]

I would have thought somewhere between now and conference season would be the prime soft spot to pick up some shares. Doesn't the SP always get a lift from the Xerocon's?

[Toasty]

I would have thought somewhere between now and conference season would be the prime soft spot to pick up some shares. Doesn't the SP always get a lift from the Xerocon's?

I think we discussed this back aways and the result seemed to be that this was not always the case. Especially at the moment when it seems that falling short of 200k customers may have just ever so slightly dented the confidence of some shareholders.

I must admit though that I have a faint hope that perhaps the American numbers will be revealed in detail at the US Xerocon. I have this little fantasy that they are growing exponentially there and they are saving this surprise to be revealed on US home ground to add to the drama. Share price goes through the roof and then....I wake up and its just a dream.

I can't really justify this scenario as I am not really sure why you would not reveal them at the AGM here in NZ. My real thought is probably that the numbers are just not compelling enough yet to break them down. Still......

[Toasty]

Hi Turmeric. I know they have always lumped the rest of world together but given the amount of good accountants reviews and awards won on American soil I was kind of hoping that there had been a large enough take up that they could reveal specific numbers as a good news story. Just wishful thinking on my part as a shareholder I think.

I agree that they haven't started the marketing push yet so numbers are not really a concern but...just interested to see I guess.

[lastmoa]

US Xerocon is the real start of Xeros push into the States, from that time it should be expected US numbers will start to pick up strongly.

I think that is probably fair Shore. I would expect an increase in the SP after the US Xerocon IF it goes as well as other Xerocons. This really will be the first time Xero is on full display to the wider US accountant community. IF you think Xero will succeed in the US AND you are considering investing in Xero then my take is that it would be wise to do so before US Xerocon.

Well said, Tumeric.

[Shore]

Share price goes through the roof and then....I wake up and its just a dream.

It's okay Toasty - I've been afflicted with the same dream.

[Toasty]

It's okay Toasty - I've been afflicted with the same dream.

I suppose we should be grateful. The dream has already happened really. I bought in at .90c and a $1.00.

[Shore]

I suppose we should be grateful. The dream has already happened really. I bought in at .90c and a $1.00.

Right - sounds like you're in a dream within a dream....

[Toasty]

Right - sounds like you're in a dream within a dream....

Like Inception but with fewer guns.

[Shore]

I suppose we should be grateful. The dream has already happened really. I bought in at .90c and a $1.00.

Can I ask what % of your initial purchase at .90 and $1.00 you've stuck firm and held on to?

[Toasty]

I sold small lots at around $3 to get my initial investment out, then a few $8 because I got nervous and wanted a bit of actual profit and then finally a big chunk at $12 because I got even more nervous.

I still have about 50% of what I started with. The plan is to follow this to the logical conclusion whatever that may be. Sadly no actual strategy here, purely emotional now.

[Shore]

Well arguably it's all emotional. It's very difficult to make any actual considered plays other than to go with your gut as to where Xero is right now and where you think it'll end up. If you were purely a numbers person and worked on fundamentals then you'd have bailed out a long time ago now!

[lastmoa]

I sold small lots at around $3 to get my initial investment out, then a few $8 because I got nervous and wanted a bit of actual profit and then finally a big chunk at $12 because I got even more nervous.

I still have about 50% of what I started with. The plan is to follow this to the logical conclusion whatever that may be. Sadly no actual strategy here, purely emotional now.

But your strategy is to follow the story and, as long as they are delivering, keep holding. Nothing sad about that.

[Lorne Ranger]

Xero by far our most sentimental purchase. Bought when just a wee thing at 2.20 (Already ancient I know by some investors standards!), we held and held, past 10, past 12, past 15... and freaked when it first hit the 10% drop in 2 day turbulence, and finally sold 50% when it reached $15 again about a month later. Looked on with mixed emotions as it swiftly hit high $18's, but content that we were diversifying, including a wee high performing gem called DIL. That was what feels like 15 years ago...... Patience just makes time go slower, which I guess at my age is a good thing so its a win win. But your point that sentimental trading being a trap I totally agree, so long can tell the difference between sentiment and belief. Therein lies the trick i suspect.

[Toasty]

Sellers disappearing fast today, time to cash up and move on, looks like a DIL moment is in the wind! :eek2:

Thanks Moosie. I'll grab some more then. Seriously though. I am interested to see how the upcoming Xerocon in San Francisco goes. Be nice to get a sense of how the Americans perceive the whole Xero thing.

[CJ]

I thought Xerocon was ages ago???They Con people multiple times a year but once once in each country. They now Con in NZ, Australia, UK and the first to come in US.

[Toasty]

Regardless of how pointless Xero personal is I believe that this will dent the shareprice. Any admission of failure will be enthusiastically punished. Look at DIL.

I do like the idea of refocusing development staff onto the main portion of Xero and hopefully closing the gaps such as Quotes and Purchase orders and anything else that detracts from its appeal against the majors competitors.

[CJ]

Regardless of how pointless Xero personal is I believe that this will dent the shareprice. Any admission of failure will be enthusiastically punished. Look at DIL.The whole idea of SaaS is that once you have the sale, it is very cheap to provide the service. Why not keep it running, even if they dont develop it anymore? Are their too many helpdesk calls?

[Shore]

Good timing on the announcement I think though... just in time for the conference season to wash away the bad taste with bottles of booze!

[Shore]

The whole idea of SaaS is that once you have the sale, it is very cheap to provide the service. Why not keep it running, even if they dont develop it anymore? Are their too many helpdesk calls?

I think you're either in it to win it, or get out of it. Xero Personal would have had its own unique set of challenges and getting revenue from consumers is a lot harder than it is from the SMB side. I think Xero would have come to the conclusion that to win the Personal space they'd need to put in a lot more time, resource and money into it otherwise they would soon get trampled by the competition. In light of that, I think they've made the right call to exit out of it early and concentrate on what is true business model - the SMB's.

[CJ]

I think you're either in it to win it, or get out of it. Xero Personal would have had its own unique set of challenges and getting revenue from consumers is a lot harder than it is from the SMB side. I think Xero would have come to the conclusion that to win the Personal space they'd need to put in a lot more time, resource and money into it otherwise they would soon get trampled by the competition. In light of that, I think they've made the right call to exit out of it early and concentrate on what is true business model - the SMB's.Probably right - they were always going to struggle in the US with it compared to Mint which is free.

[zs_cecil]

personal finance solutions will soon move out into the SME space using new technologies that Xero know nothing about and does not yet have. of course they will be able to buy these technologies. These technologies will also cater for tax in multiple countries including special technologies for tax modelling. These technologies do not rely on large scale develop teams and use new data models that make it very easy for B2b development and places a lot more power in the hands on front line users such as accountants and there staff and there small tech teams. No special training is required in computer technologies to use these new models.

Hi surfersteve. This sounds very exciting. Could you name one two of the technologies? I am very curious about them.

[bigev]

personal finance solutions will soon move out into the SME space using new technologies that Xero know nothing about and does not yet have. of course they will be able to buy these technologies. These technologies will also cater for tax in multiple countries including special technologies for tax modelling. These technologies do not rely on large scale develop teams and use new data models that make it very easy for B2b development and places a lot more power in the hands on front line users such as accountants and there staff and there small tech teams. No special training is required in computer technologies to use these new models.
I'd like to see that in reality. IMO, data models are not constraining developers and in many large applications the middleware takes away the need to understand the models yet development times dont decrease. You still have to develop and test a lot of user interaction combinations that are entirely separate from the datamodels and technology used to house the data.

[Shore]

Customer numbers now 200k+, revenue growth at 102%, staff numbers at 507 - just announced at Xerocon Sydney

[Snow Leopard]

bigev, i have seen a model inside a research group that has what you could call an "application browser that renders an application in very few instructions compared to traditional programming". Its designed to deliver business applications to private individuals and small SME's and also accountants. Do you dont have to be a programmer to make changes to it. It also demo'd generating other platform code in the background. So it ran as a program and also as a generator.

When you have been around as long as I have - you get used to this sort of claim, smile to yourself and on occasions even laugh out loud.

Whether it be called configuration or programming or 'graphically arranging functional blocks for the desired outcome' there are a few basic requirements the user needs:
To reasonably fully understand the requirements to be met;
To understand how the tool is used to implement those requirements;
To know the limitations of the tool;
Maybe even to be able test the solution.

Lots of people can not do this, do not have the time to do this or do not have the confidence to do this.

Best Wishes
Paper Tiger

[Everwood]

Customer numbers now 200k+, revenue growth at 102%, staff numbers at 507 - just announced at Xerocon Sydney

Are you at Xerocon? I have been reading the updates on my tablet that I carry around in my tote. I haven't seen them mention 200k+? I might have overlooked this on 7 inch screen. Rod did say "global update is setting the scene showing the growth of the company, 102% for FY2013, staff at 507 as at 1 August" http://blog.xero.com/2013/08/xerocon-sydney-2013-day-1-live/

[Toasty]

I can't see the 200k number either. Maybe he just said it in his speech? It would be nice to cross that milestone even though it doesn't really mean a lot in the scheme of things. More interested in the San Fran event to see if that shakes loose any interesting news.

[Shore]

Re the 200k customers = Not at Xerocon but saw it on the slides from the photos people were taking. They say they've added 100k in last 13 months.

[zs_cecil]

When you have been around as long as I have - you get used to this sort of claim, smile to yourself and on occasions even laugh out loud.

Whether it be called configuration or programming or 'graphically arranging functional blocks for the desired outcome' there are a few basic requirements the user needs:
To reasonably fully understand the requirements to be met;
To understand how the tool is used to implement those requirements;
To know the limitations of the tool;
Maybe even to be able test the solution.

Lots of people can not do this, do not have the time to do this or do not have the confidence to do this.

Best Wishes
Paper Tiger

You have made the point :) I agree with you. There are far more knowledge and processes behind these technologies required in order to build and sell a successful product. Xero is not merely competing on its technologies. I don't believe accounting companies would want to spend too much time on developing and configuring a software to just fit what they need. They would rather choose a right product and spend time on up-skilling their people in using it.

[zs_cecil]

The 200+ news is good. Hope Xero will do the same thing and release some data related to US market in US xerocon.