De Kieviet’s Gambit – more CTSpace ‘spin’

The latest spin on CTSpace comes in a one-page ‘Company focus’ feature in UK trade weekly Building (see PDF on CTSpace’s website). At first glance, the article, written by Mark Leftly, makes CTSpace seem a very credible venture, but I think there are some very debatable assertions.

1. I was puzzled by the claim that the merger of BuildOnline and CTSpace created a company “with a turnover of £10.2m). This figure is repeated in the box under Gert-Jan De Kieviet’s photograph where it adds BO and Citadon “provide roughly a 50:50 split”. Only last month (see CTSpace: initial redundancies), CTSpace CEO Howard Koenig said the combined business had combined revenue for Year-End June 2006 of approximately £8 million. To grow from around £8m to over £10m in just six months takes some doing!
2. “CTSpace now has a global workforce nearing 100, including a team of 35 in India”: the inference is that the business is now bigger. However, the figure actually reveals that a programme of redundancies has already cut deep, as the headcount is already down from the 130 it was when Koenig was quoted (c. 18 December).
3. Citadon may have been founded in 2001, but its origins go further back. Indeed, as previously discussed (see CTSpace further dissected), CTSpace is now the latest manifestation of 11 previous (failed) brands.
4. The article repeats Koenig’s boast that “Now combined, we are unrivalled in our ability to provide global collaboration expertise.” Given the global reach of at least two rivals – Autodesk (and its Buzzsaw/Constructware collaboration brands) and Aconex (among others) – CTSpace is certainly “rivalled”; and in terms of users, it is actually still some distance behind Autodesk globally, and lags behind other players in various individual markets (including the UK, where I believe BIW to be the market leader).
5. There is a frank admission that for Citadon “99% of its business was in the US whereas 99% of BuildOnline’s was in Europe”. This may just be an extreme illustration, but such polarisation clarifies why CTSpace has had to maintain both partners’ sets of products: neither was good enough to satisfy both US and European markets.
6. There is no mention of the word profit in the article; instead, it seems it’s all about turnover (“over the next two or three years, the firm aims to double in size, meaning turnover will top £20m”). Again Koenig has previously been reported as saying he is aiming for break-even by year-end 2007, but this will require a strong performance by De Kieviet’s North EMEA business (which includes the UK), particularly if it is turnaround the ailing BuildOnline UK business which lost nearly £1m on a turnover of £2.8m in the year to 31 March 2006 (see BuildOnline UK position worsened).
7. And the final paragraph is just hype. Mark Leftly shouldn’t believe all he’s been told by CTSpace. First, it has yet to prove that it is “now a truly global business”; second, I don’t foresee rivals acknowledging “they have been left behind”. Moreover, looking at the previous track records of Citadon and BO, neither should inspire particular confidence in customers or investors (having merged nearly a dozen businesses so far, and burned their way through, between them, somewhere over £100m to date – see CTSpace raises $5.3m); the M&A strategy hasn’t, so far, translated itself into profits, and rival collaboration vendors might, with some justification, argue that a better strategy might be to build more gradually a single, solid, focused and ultimately profitable business.