www.globeandmail.com

The Globe and Mail
leaftheglobeandmail

 

Moore at a crossroads: In the digital age, a speciality in preprinted business forms is an anachronism

BENJ GALLANDER and BEN STADELMANN

Saturday, February 19, 2000

When Roger Moore left the “sainthood,” there was some question as to whether his acting career was toast. But faster than one could say “Moneypenny,” Mr. Moore went on to bigger and better things as Bond, James Bond. The folks at Moore are hoping their firm will be reincarnated so well.

Toronto-based Moore is at a crossroads. In the digital age, a speciality in preprinted business forms is an anachronism. Businesses can design and print their own forms using inexpensive network laser printers, or even better, have forms filled out on-line.

This technological change is threatening to turn Moore into a footnote in a tome about dinosaurs. The stock price has tanked, falling from more than $30 in 1997 to around $8.

Competitors have also been feeling the vice-grip of progress.

Wallace Computer Services' stock price recently cracked the $10 (U.S.) barrier, careening down from $35 at the turn of 1998. Standard Register's price has been halved in the past 52 weeks and Xerox has been cut by a third.

Thus far, Moore has responded like a race horse with an obese jockey, breathlessly passing the whip from one CEO to another as the firm shredded divisions, employees and plants. In fiscal 1998, the last year reported, the loss came in at a galloping $548 million, with a numbing $615 million in restructuring charges. However, earnings for the first nine months of fiscal 1999 have been positive.

As the decline in the forms business intensifies, why did we recently climb aboard at $9.15 (Canadian) a share? Moore is looking smartly to the new world order to pick up the pace. As John Laurie, the new millennial vice-president and treasurer said: “Instead of fixing what we have, we're looking at what else we have to get into.”

Three performance teams have been established to direct the chase in the areas of a radio frequency identification program (RFIP), digital printing and e-business.

Mr. Laurie is particularly excited about RFIP and with good reason. As Web purchasing leads to more and more parcels being moved, a better system is needed to identify and trace packages. This methodology can be applied to baggage handling, especially as routing luggage becomes more complex.

Moore realizes it cannot simply rely on its own resources to grapple with the 21st century. Alliances are necessary, like the one with Atrium Capital, a Silicon Valley-based venture capital outfit, to develop initiatives, including Internet billing and interactive marketing. The focus on digital technology capitalizes on Moore's inherent strengths and relationships with business customers, while utilizing leading edge software tools.

Another agreement was reached with VISTAinfo, the largest U.S. Internet provider of property risk information to real estate professionals, making Moore the second largest stakeholder. VISTAinfo's management predicts the synergies created will lead to revenue exceeding $100- million (U.S.) this year. Moore received $50 million in cash, common stock and convertible debt as part of the transaction.

Perhaps the best way to deal with the dwindling market for business forms would be for some of the players to create compacts to squeeze a little more juice out of the business. With the stock price this low, Moore is an attractive merger candidate, but it's also strong enough to take over an ailing competitor.

Moore is a prime example of a blue chip that has had the colour drained. In the minds of most institutions and analysts, the only hue seen is a crimson red warning flag. With most doubters having relieved themselves of their shares, an interesting opportunity exists for more optimistic individuals who are willing to assume greater risk.

The balance sheet is sound, as a company with around $2.4 billion in sales and only $200 million in long-term debt does not have to worry about bankers screaming down its fonts. Free cash flow should be marginally positive or negative for the near future. After the TransCanada PipeLines dividend fiasco, management should be loath to slash the dividend, which represents a very respectable 4 percent return. This should restrain the stock price from dipping too much further.

The most likely scenario? Moore will pursue a radical reorganization with forms ultimately becoming one operation among many. The firm and its partners will do the research and development necessary to restore focus, and many institutions that scorned Moore will climb back in the saddle.

A quadruple from this beleaguered level? If CEO and president Ed Tyler is as good a trainer as many believe, that would simply trot this pony up to past performance. Certainly it's easier to regain form than find it.

back