A Dublin company which produces data communications software for the airline and travel industries, is planning to float on the Dublin DCM and London's AIM markets before the end of 1999.
With sales of around £5 million this year, and a net profit margin of 25 per cent, Howth-based Datalex Communications expects to increase its sales to £10 million next year. Two Irish venture capital companies will take a 25 per cent interest in the company next month, as part of on-going preparations for the flotation. Their identity is not being revealed until the funding is complete.
"This is the capital injection we need to push ourselves further into the market. We'll bring in another tranche of venture capital money within 12 to 15 months, which would set us up for a public quotation," says Mr Neil Wilson, managing director.
Founded in 1985, Datalex sells communications solutions directly to airline global distribution systems (GDSs) - like SABRE, GALLILEO and SITA - which then market the products on to 20,000 travel agents worldwide. This accounts for 10 per cent of the world GDS communications software market and 90 per cent of Datalex's sales. The remainder of the business provides software directly to airlines, connecting remote offices to mainframe systems.
Datalex employs 38 people at its offices in Howth, and a recently-opened sales and marketing arm in Denver, Colorado. This figure is expected to increase to 50 within six months. Around 70 per cent of trade is done with North America, though Datalex has recently moved into Russia and China saying they represent low-cost, high-volume markets.
Given the recent trend among Irish technology companies of floating on the New York exchange, Nasdaq, the preference for a Dublin stock market listing is a little unusual. The volatility of the Nasdaq market does not suit Datalex at present, according to Mr Wilson, though he sees no reason why they cannot take it up at a later date.
"The only reason you go to market is to give yourself a tradeable commodity - that's it. We make enough money, I have a very pleasant lifestyle, I am not interested in going to the US every two weeks to stand in front of a bunch of analysts," says Mr Wilson.
Originally, Datalex provided check-in and reservations technology, but as the airline industry went into a slump during the 1980s the decision was made to focus on the GDS and travel agency business.
Datalex communications software slots into the back of a PC. It allows users to connect to any number of mainframe systems - airlines, surface carriers, hotels, car rental companies etc. GDS companies then customise the software for their own clients, although the communications technology remains the same.
As airlines move towards low-cost network computing, (NC), Datalex is developing software which is NC compatible, or middleware. Its specific knowledge of airline protocols (communications enablers) gives Datalex a competitive advantage, particularly now that most airlines are outsourcing their research and manufacturing requirements.
The advent of the Internet presents new opportunities for companies such as Datalex; they must now develop products which allow old legacy-type systems to work hand-in-hand with new applications, like e-mail. All communications software needs to be adapted to the new protocols for the Internet, while also ensuring quicker access, easy installation and low maintenance. "The whole Internet access area is going to explode. We have active proposals in with eight airlines at the moment - a couple of years ago that was unheard of," Mr Wilson says.
Forming strategic alliances with software and hardware companies is essential to ensure that Datalex can meet its clients requirements. This way the company can merge its communications technology, with other middleware baseline products to develop "frequent flyer", and Internet booking systems.
The origins of Datalex stem from Channel Communication Services (CCS), a company Mr Wilson set up in Amsterdam in 1983. Developing industrial communications software for Westinghouse, based in Clonshaugh in Dublin, CCS came to the attention of the IDA. In 1984, the authority asked Mr Wilson if he would consider setting up an office in Dublin.
In 1985, Mr Wilson sold his 50 per cent share in CCS, and set up Datalex with the aid of employment and capital grants from the IDA. Forbairt recently took up a 5 per cent stake in the company.
"Forbairt has been a very supportive shareholder, I would have to say, we would have ceased to exist if it hadn't intervened in 1993," Mr Wilson says.
The Irish Trade Board's targeted marketing consultancy programme helped in the set-up of the Denver office last year. The programme underwrote 40 per cent of the £1 million cost of establishing the office.
