THE DOT-COM SURVIVORS

THE DOT-COM SURVIVORS

John Bradford, corporate transportation manager for testing equipment manufacturer Teradyne Inc., helps explain why some logistics technology startups are thriving while others may not survive to see the second quarter. Though he ships goods from U.S. manufacturing plants to multiple markets around the world, almost all of it by air, Bradford is far from a viable prospect for a software startup. He's declined, for example, to license software for route optimization. He prefers instead to develop routing options in-house through his own experience or by working with his forwarder. Nor has he perked up at other dot-com offerings such as freight auctions or contract management software. He purchased one logistics software system, the online export-compliance service of Vastera, but hasn't yet brought the system online.

Aside from export compliance, what Bradford is most interested in is visibility of his shipments en route. Many private surveys have shown that's the one technology function that shippers desire above all others. This he gets wherever possible from Expeditors International, which coordinates most shipments of Teradyne's bulky testing machines for telecommunications and electronics makers.Three years ago Teradyne chose Expeditors as its principal forwarder for heavyweight international shipments. The relationship has evolved to the point that Bradford describes it as a strategic alliance. 'Overall we have a very good relationship with them,' he said.

Because of that relationship, Bradford says, his company has little need to plunge into the transportation management software market. 'I'm certainly not interested in micromanaging our forwarders or the airlines that our freight forwarders use. I expect our forwarders to use carriers that they have deemed to meet their requirements.'

Bradford's attitude toward technology services, to the extent that it's shared by others in a transport purchasing capacity, is contributing to a change in the transportation technology landscape. That change could have big implications for traditional transportation companies. They could end up owning some of these struggling technology firms.

Robin Roberts, who covers international logistics technology companies for Arkansas investment bank Stephens Inc., has some thoughts on that. She notes that venture-capital financing for software start-ups has largely dried up, thanks to the falling stock market. Venture-capital firms are demanding profits sooner rather than later from the companies they've bankrolled. That has forced many of the start-ups to cut staffing and other expenses.

'A lot of these private software companies, even though they have a sound business model and good technology, are having a hard time raising money,' Roberts says. 'They're still burning cash, and they can't raise money with the VCs, so the only way out is to sell.'

'A lot of companies are knocking on the doors of publicly traded companies looking to be acquired,' she says. 'The consolidation in this space is much faster and earlier than we expected, because of the down market.'

Roberts says the current environment offers traditional transportation companies an opportunity to acquire technology and expertise they probably wouldn't have developed on their own.

'If logistics and transportation is their core competence, and they want to use that to differentiate themselves, now is a good time to scoop up some of these companies,' she says.

Vastera is one company that may be in the acquisition market as a buyer. Roberts says Vastera, which went public last September, has $90 million in cash on its balance sheet and claims to need only $27 million to $30 million in net additional spending to reach profitability.

She sees private placements involving traditional transportation companies as another type of deal that may become more frequent. Under these deals, she says, a transportation company -- she cited APL Ltd. and Orient Overseas Container Line as possibilities -- would become a strategic investor in a firm they may later acquire. 'If deals get done, it will be with strategic investors, rather than VCs,' Roberts said.

On a different subject: For an excellent discussion on the great debate now under way about customs clearance matters in Washington, see John Peterson's Customs Update column on JoC Online, at www.joc.com.

Peter Tirschwell is editor of JoC Week. He can be reached at (973) 848-7158, or via e-mail at ptirschwell

oc.com.