Outsourcing, Technically Speaking

01/05/2007 12:00 am EST

Focus:

Jim Collins

Chairman and CEO, Insight Capital Research & Management, Inc.

While much has been written about outsourcing, attention is now being turned to the technical side--providing the tools needed to facilitate the moving of information. Here, Jim Collins offers a look at a company meeting this global need...

"Infocrossing (IFOX NASDAQ GS) provides information technology (IT) outsourcing solutions to commercial and government enterprises primarily in the US. Services are designed to provide customers with the ability to strategically outsource non-core IT operations and IT-driven business processes to reduce costs and improve performance without risk or loss of control associated with wholesale outsourcing engagements. Solutions the company provides are segmented into four practices: IT infrastructure outsourcing, healthcare IT and BPO solutions, managed services, and enterprises application services.

"Mainframe outsourcing solutions provide customers with an alternative to running and managing a mainframe infrastructure in-house. The company offers the latest technologies, including VTS, IBM's zSeries technology and Linux on the mainframe. Non-mainframe solutions comprise midrange systems management, open systems management, business process outsourcing, E-mail security services, and business continuity.

" Midrange systems management provides support resources for customers that rely on AS/400 and iSeries computer systems. Open systems management provides onsite hosting and remote management of customers' hardware and software running on Linux, UNIX, and Windows servers. Business process outsourcing includes healthcare claims processing, payroll, accounts receivable management, payment processing, logistics, data entry, and customer care services. E-mail security services provides customers spam blocking, virus scanning, identification, cleansing, and content filtering. Business continuity services constitute disaster-planning assistance twenty-four hours a day, seven days a week.

"For the quarter ended September 30, 2006, Infocrossing reported net income of $0.11 per share, compared to $0.01 reported in the prior year. Total revenue increased 69% to $58 million compared to $34 million reported last year. The company exceeded consensus expectations by $.01. New revenue commitments received approximated $26 million during the quarter, including one contract ten years in length.

"Infocrossing's stock is at its 52-week high. Of the approximately 11.0 million shares in float, 121,688 trade daily. Banks and mutual funds own 58.0% and management owns an additional 42.0% of the shares outstanding. The company has a relative strength of 93 and receives a rating of A+ for accumulation/distribution.

"Customer concentration is a risk in that one customer represents over 10% of revenues. The market is highly competitive with significant competitors being IBM, Electronic Data Systems, Affiliated Computer Services, and Sunguard Data Systems. As the company must find, hire, and train personnel to continually grow, an inability to manage this process could cause the company to fall short of its goals."

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