From Xero to Hero?

In the last 3 weeks the stock price of Xero Ltd [XRO.NZX] (see one month chart above) has outstripped the rise in the NZX by 18% or 1000% more than the 2% rise on the NZX50 index (see chart below).

The stock price rose sharply after news on October 22 that an influential investor bought a large stake in the company but came back from that rise and evened out at the beginning of November.

Since then though the stock has risen from $1.65 to rise 15c to $1.80 at time of writing or just below 10%. This is an all-time high.

There has been nothing significant to report on developments over company progress so it looks like this is a case of the market getting carried away with itself.

Can the phantom Xero poster who keeps teasing me stop it please.





Xero @ Share Investor

Stock of the Day: Xero Ltd
Rod Drury ready for the long-haul with Xero
Share Investor Interview: Xero's Rod Drury
Xero Ltd: Download full Company Analysis
Rod Drury on Xero and Growing Business
Xero set for surprise to the Market?
Love Xero?
Share Investor's 2010 Stock Picks
Stock of the Week: Xero Ltd

Discuss Xero @ Share Investor Forum
Download Xero Company Reports


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c Share Investor 2010

2010 NBR Rich List

The 24th annual 2010 NBR Rich List (see full list at NBR - Requires Sub)was out this morning and revealed the usual bunch of multimillionaires with a few additions to last year and some notable omissions from the 2009 list.

Graham Hart topped the list with a $5 billion plus fortune and there was an inclusion for the first time by Rod Drury, CEO of Xero Ltd [XRO,NZ] and the exclusion of folk like Terry Seripisos and beleaguered businessman Allan Hubbard.

The usual entry of old money from the likes of the Myers, Todds, Fay, Richwhites and Spencers also continue to eek out places in the top ten.

The top 10:
1 Graeme Hart $5.5 billion
2 Todd Family $2.7 billion
3 Eamon Cleary $2 billion
4 Lynette Erceg $1.5 billion
5= Christopher Chandler $1.4 billion
5= Richard Chandler $1.4 billion
6 Goodman Family $850 million
7= Stephen Jennings $800 million
7= Sir Douglas Myers $800 million
8= Sir Michael Fay $750 million
8= David Richwhite $750 million
9= Michael Friedlander $700 million
9= Spencer family $700 million
10 Peter Cooper $650 million

NBR @ Share Investor

2009 NBR Rich List
2008 NBR Rich List
NBR Headlines


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c Share Investor 2010

Rod Drury ready for the long-haul with Xero

I take a number of things away from an interview I did with Xero Ltd [XRO.NZ] Rod Drury but the two things that stick in my mind are his deep passion for the business and the fact that he is in it for the long haul.

Previous to this disclosure most of us thought he was trying to build a brand to eventually flog it off but Rod has some long term goals to achieve:

Share Investor - "Was the intention of yourself and the Xero board to build the company up as a brand with the express purpose of selling, along the lines of say 42 Below?"

Rod Drury - "No. Having sold businesses before, this time we want to grow a long term business. The market is really just starting and with accelerators like iPads, Google's up coming Chrome operating system we think that things are only just getting exciting."

While there is some merit in building a brand for someone else to buy in the short-term, more money will be made from a business for its shareholders - if it is based on good premise and run well - when the the long-term game is played. Xero has an advantage there playing the long term game.

Rod's overriding passion for his business is a motivation for those around him and the business as a whole because it provides an impetus for employees to manage themselves in a similar way and radiates out to Xero consumers - hey passion is contagious!!

I still wouldn't touch Xero with a barge pole though, not because I don't think the company is a good one, but as an investment it is one of the riskier ones for those individuals who understand the sector in which Xero operates. I still don't fully understand Xero and what they do and I like to invest in companies in which I know what they do and how they do it. I think you have to be a tech head or a user of Xero products to be able to know it well. Then if you are in that position and do know the company well and therefore see where they are going I dont blame you for investing .

Having said that I will reserve my final judgment for the promised profit for Xero in 2011 indicated by Xero management at their annual meeting last year.

I would like to publicly thank Rod for participating in the Q & A, for whatever you think of his company we don't get enough leaders of our public companies willing to put themselves under this much scrutiny.

I enjoyed the experience immensely.


Share Investor Q & A Series

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Ecoya's Geoff Ross
Xero's Rod Drury
Mainfreight MD Don Braid
Burger Fuel Director Josef Roberts
Sky City CEO, Nigel Morrison
Sky City Entertainment: CEO Nigel Morrison discusses 2010 HY
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Xero @ Share Investor

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Xero Ltd: Download full Company Analysis
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Stock of the Week: Xero Ltd

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Download Xero Company Reports






c Share Investor 2010

Share Investor Q & A: Reader Questions to Xero's Rod Drury

After I wrote this small piece the other day about my interpretation of Rod Drury's interview on Radio New Zealand's Nine to Noon about his company Xero Ltd [XRO.NZ] he left a comment refuting some of what I said.

He kindly mentioned if I wanted to email him about questions I might have that could illuminate my mind on his company I was free to do so.

He also agreed to do a Share Investor Q & A to give his side of the story.

I know little about Rod and where he is going with Xero but he has many fans out there in techland and they are insanely loyal about the company, its products and its people and this will be my chance to get to know him and his company better. I am open to conversion!

I have some questions in mind to put to him but I would like to know what you guys think.

Leave your questions for Rod here, which is the comments part of this post, and I will include the best ones in the Q & A.

Cut-off time for questions is end of Tuesday 20 April, so don't dawdle.

NB - the interview will be posted here shortly so please stay tuned. There are more questions asked than I thought there would be and as Rod is a busy beaver he will need some time to answer in a manner that he sees fit.


Share Investor Q & As

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Stock of the Week: Xero Ltd

Discuss Xero @ Share Investor Forum

Listen to Rod Drury Interview

Download Xero Company Reports


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c Share Investor 2010

Rod Drury on Xero and Growing Business

A really interesting interview today on Radio New Zealand given by Rod Drury, the founder of Xero Ltd [XRO.NZ]

Apart from the fact that he is clearly a smart cookie, entrepreneurial and is fully aware of technology and its application in the real world and a very positive person (and don't we just need that in our little negative backwater of New Zealand - such a negative thing to say Darren!) I found what he said about business in general and his own Xero to be quite revealing.

I got the impression from what he said is that Xero could be one of those companies that one builds up with the intention of flogging off to a willing buyer sometime in the future.

Rod cited a number of cases that this has happened, Trademe was one but two that really interested me were 42 Below and the upcoming listed player Ecoya.

42 Below was built up to sell and the intention is that Ecoya will probably go along the same lines.

42 Below is yet to make money but did of course for those that sold the company and Rod hinted that this is a business model that he liked. He also mentioned that Xero could break even in 2011.

I haven't heard it indicated before although I have wondered to myself as to whether Xero is a company along the same lines as the aforementioned and the founders are just waiting for some kind of large sugar-daddy like Reckon Ltd [RKN.AU] or MYOB to snap them up to remove the losses from their balance sheet.

I like businesses that grow and make money but hey that's just me, unconventional and completely off the wall.

*Please see Rod's response to this blog here - seems my impression was wrong.

**Rod is going to do a Share Investor Q & A. Please submit reader questions here.


Xero @ Share Investor

Xero set for surprise to the Market?
Love Xero?
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Stock of the Week: Xero Ltd

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Listen to Rod Drury Interview


Related Links

Xero - Corporate Website




c Share Investor 2010

Love Xero?

Scott Manages a website development business in London and answered a few questions for me about the recently listed software company Xero [XRO.NZ]and what its prospects might be for the future. He is not affiliated in any way with the Xero company.




About the software


Powerful connections. With Xero, you can access your accounts and run your business from anywhere in the world, 24/7. And your trusted adviser's can login and view your accounts too, providing valuable real-time advice when you need it most. No more confusion, no more delays. Say goodbye to barriers. Xero's intuitive work flow makes painful data entry a thing of the past. Seamless bank integration allows your statements to be loaded daily without even clicking your mouse. And Xero's powerful Dashboard gives you a real-time snapshot of your business at a glance. Peace of mind. Xero takes care of your data security and privacy, so you don't have to. Your data is stored on our secure servers and backed up every day, so even if your computer is lost or stolen your data is safe. You control who has access. The only people who can see your personal data are those you choose.


The Questions

To answer your questions, most of which require some degree of speculation...

Share Investor: How much market share, given time, do you think Xero can take away from traditional off-line providers?

Scott: Plenty, with time. Initially people like myself will become the early adopters, and if it really is as good as it potentially can be, word of mouth will spread it far. The advantage for Xero, what harm can there be paying a couple of hundred dollars to test it out for a few months, indeed they could easily offer a free month or two, once you are hooked (or you get to the point that it's easier to persevere than change accountancy systems) then you have a customer for a very long time.

I can see growth potential with payroll integration also, email payslips, the whole thing. Too many companies use a different piece of software for every different tasks. Then licensing fees, upgrade costs, etc.

One of the biggest costs with traditional accountancy systems is multiple users on multiple PC's. This cost is gone with Xero.

S.I. Is the Xero product so superior that it will take users away from other online providers such as Quicken and MYOB?

Scott: I think yes, eventually. So it is a long-haul investment. MYOB and Quicken will respond, Quicken already has an online model in the US. But they rely heavily on what I outlined above, once a user has coughed up the $ and implemented their business on a system, they aren't going to change in a hurry. Give them a compelling and easy change though, and who knows?

Xero's advantage here is they can make changes, fixes and upgrades quickly and efficiently, Change a few lines of code and instantly fix a bug or small problem. Spend a day programming a new feature, test it, and it's online two days later.

S.I. The costs to the end-user, are they lower than online software?

Scott: I think if you looked at the OVERALL cost it would be competitive, compared to the features and abilities available. Sure, you can spend $400-600 on MYOB or Quicken and use it for 5 years - or spend $600 a year on Xero. But what are you missing out on that your competitors will have over you during that time? Quicken and MYOB still have issues emailing a frieken invoice! Xero will probably be able to integrate into your company website... it wouldn't surprise me if they implement a Credit Card payment module for you to use...

S.I. Margins for the company, how good could they be once initial establishment costs are factored in and then overcome over time?

Scott: Fantastic. SaaS is a wonderful business model. If things are done properly you could have a handful of people run the entire company (as it is). They will have to hit the right mix of features, price etc and I think that they will. It will be very interesting to see what offers they come up with, really I should email Rod Drury to see if some of the things I have mentioned here are on the cards.

S.I. Is the only point of difference between competitors off and online products the fact that Xero is online?

Yes, and No. Being online does lean toward a whole other set of advantages, a few of which I outlined above. There are certainly advantages to having offline software, if you are stuck somewhere with a laptop and no internet connection, but is that the way of the future? No, I didn't think so either.

S.I. Will it be horrendously expensive and or technically challenging for prospective clients to switch from their current provider to Xero?

Scott: I hope not. There are several options, either you keep your existing accountancy software around, but stop using it on a certain day and transfer balances, stock levels etc to the new system. Or Xero can come up with a migration tool. Or simply target NEW businesses first or those without an existing system.

They would be smart to sell this to the accountants, who will then recommend it to their clients as a system they can easily access as well. The possibilities are limitless, but no changeover will ever be VERY easy... or, it could be, who knows?

S.I. What is the main reason why you want to use this software and why not shift your current business accounts to Xero as well?

Scott: I sold both of my businesses before leaving for London, and my Trust accounts are so pathetically easy I do them in Excel. However, When I return to NZ my next business will be Xero based. I will use it to eliminate the frustrations I experienced with other accountancy software I used, mainly user limitations, bank reconciliations, expense management, jeepers almost everything!

The value I see in Xero is that if a feature ALMOST works the way you'd like, theoretically they can have change online within hours after a response to user feedback. This will happen thick and fast on startup, as they vie to impress...

S.I. Are any competitive differences easily overcome by Xeros rivals?

Scott: If Xero's rivals are well aware of their weaknesses, why haven't they done anything about them by now? I think they have underestimated the online market, to be honest, as have many people in the past - I can see Xero's advantages, and have watched them closely since listing. Maybe there will be rumblings, who knows? I am willing to bet the people behind Xero intend to stay ahead of the pack no matter what, and they are off to a good start.

S.I. How will the likes of giants such as Google online apps affect Xeros entry into the marketplace?

Scott: Hard to say, multinationals often forget New Zealands special needs in these areas, so Xero may rocket here but find it hard to break the US and UK. A tough call.

S.I. What are the costs of continuous development of this software to stay ahead of the pack?

Good question, although I don't have the answer I would say they are attractive compared to version updating, releases and distribution from the big two...

To put it in perspective, I work for a company in London that uses a SaaS model, they don't really even realise it. The IT Dept consists of 5 staff, which is more than sufficient to manage the website and support new development. The online model is worth hundreds of thousands of pounds to their business.

They developed it themselves to replace the offline model, shooting themselves in the foot? No. Because they have happier and more dedicated customers, spending more money with them!

S.I. Given mostly positive answers above how long do you think Xero could take to become a market player of some substantial nature or even a dominant player in this sector?

Scott: I will get onto the Xero bandwagon soon, I think their listing price could still drop a little more while they are quiet and people get itchy feet, or don't really understand what they have bought into... Xero will show it's results when it is ready, I get the feeling it will have VERY rapid growth, next year(2008) should be an interesting year.

End.


Xero @ Share Investor

Share Investor Interview: Xero's Rod Drury
Xero Ltd: Download full Company Analysis
Share Investor Q & A: Reader Questions to Xero's Rod Drury
Rod Drury on Xero and Growing Business
Xero set for surprise to the Market?
Love Xero?
Share Investor's 2010 Stock Picks
Stock of the Week: Xero Ltd

Discuss XRO @ Share Investor Forum

Download XRO Company Reports
Listen to Rod Drury Interview




c Share Investor 2007