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Sunday, August 17, 1997 < Prev Next >

Visio charts rapid growth with its drawing software

Analysts used to worry that Visio Corp. was a one-product company in a narrow niche.

But in the past year the Seattle company, which sells a business drawing software package called Visio, has done a lot to soothe that concern: revenues have jumped, the stock has more than doubled, and Visio has proven its software line can be expanded to suit an ample array of business needs.

"These guys really have their act together," said Bob Toomey, an analyst with Piper Jaffray Inc. in Seattle, concerning Visio CEO Jeremy Jaech and his executives. "They're an impressive management team and it's really showing up in their financial performance."

Much of the reason is that two new products have taken off quickly in the past year. Visio Technical, a product based on the standard Visio engine but targeted at more technical users, has grown to generate nearly a third of Visio Corp.'s sales. Quickly grabbing another third is Visio Professional, which only debuted at the beginning of this year.

The company's fourth product, Visio Maps, was introduced a month ago to good industry reviews. Next week, the company plans to release upgrades to its main Visio products.

The new releases have helped the company grow from $59.7 million in sales for fiscal 1996 to what analysts predict will be nearly $100 million for the fiscal year that ends in September. The company's stock price zoomed from $36 per share in March to an all-time high of $80 before a 2-for-1 stock split last week. It now trades at about $35 a share.

"They have a core engine and they seem to be finding new ways to leverage that engine," added Scott McAdams, senior research analyst at Seattle-based Ragen MacKenzie Inc. "They were basically a one-product company a year ago, and now that's not true."

He predicted that Visio Pro "is going to be big. And they're working on products right now that we won't see for another year."

Visio's executives set out in 1990 to create a new category of drawing software targeted at nontechnical business users. Released four years ago, their flagship Visio software carried the message that one didn't have to be an artist or technical guru to use a graphics drawing package.

Company executives have boldly stated from the beginning that they want to become the single standard for business drawing.

Skeptics wondered if the market was big enough to support a company, and whether the start-up had enough marketing prowess and financial strength. At the time, technical drawing software was dominated by Autodesk Inc.'s AutoCAD.

By living up to its ease-of-use claims, the company has quickly grabbed more than 1.4 million customers, and has gone from break even to collecting a tidy profit of $11.1 million last year.

It has stayed narrowly focused and aligned very closely with Microsoft Corp.'s latest technology. It has also kept its price points low: The standard version of Visio sells for just $199.

Executives also correctly gauged their niche: business people who need to draw organizational charts, flow charts, office layouts and network diagrams but don't want to pay $2,000 and up for complex and cumbersome computer-aided drawing software.

"They have a strong position," said Toomey. "They still have a lot of opportunity to grow, and they don't really have any competition in the general business drawing category."

Visio Professional and Visio Technical are both based on the same core Visio engine. They are, however, targeted at two new audiences: Pro for those wishing for a more powerful package for software design, database mapping, complex network diagraming and business process management; and Technical for those needing to draw electrical schematics, piping and instrumentation installations, controls and process plants and construction.

"We were surprised that Pro got up there so fast," said Visio co-founder and executive vice president Ted Johnson. "We just caught the market and hit it right on."

Telecommunications companies are scrambling to build out their cellular and wireless systems, and scores of companies are building new computer networks. Both groups are using Visio Pro to help them quickly diagram their systems.

Impressed with the company's work so far, analysts are equally interested in what's under development. This year, the company made two small acquisitions: Chicago-based SysDraw Software Co., which gives the company an extensive new library of networking shapes, and technology from Boomerang Technology Inc. of San Diego.

The acquired technology gives Visio a second drawing engine, one that "is a pure Windows AutoCAD look-alike," McAdams said.

Analysts say the technology, being put in a product code named Phoenix, could rival AutoCAD, and will be priced at a much lower $500 or so.

"Technical CAD is still two-thirds of the market and if they can execute as well on Phoenix as they have on Visio, they'll have another wonderful addition to the product suite," said Toomey.

Visio executives are cautious about their expectations for the product, due out at the end of the year.

"Our No. 1 objective is going to be just to have it considered as a viable alternative to AutoCAD," Johnson said.

He expects the staff to grow from 192 today to 275 by the end of the year, and possibly 500 a year from now. Part of that growth will come from doubling the company's corporate sales staff, as well as boosting its San Diego development team.

Puget Sound Business Journal

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