Triple P N.V.
Triple P N.V.
Sales: NLG 292.9 million (US$150 million) (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: TPPPF-BB
SICs: 7373 Computer Integrated Systems Design; 7372 Prepackaged Software
Triple P N.V. supplies customized computing and networking products and services, primarily to the healthcare, print and publishing, and telecommunications industries. Triple P (the Ps stand for People, Performance, and Partnership) describes its business as operating in three principal areas: Systems, for the provision of networking and relating computing solutions; Services, including hardware and software systems management, maintenance, training, and consulting; and Software Solutions, including the adaptation of third-party software to meet customers’ requirements. Systems accounts for some 51 percent of Triple P’s revenues, while Services adds 40 percent; the company’s Software Solutions division represents the remaining nine percent of sales. The company has targeted primarily small and medium-sized companies often overlooked by Triple P’s rivals.
Triple P has experienced its share of growing pains in the late 1990s. After attempts at global growth in the 1990s, Triple P has seen its sphere of operations retract to focus especially on The Netherlands and Belgium. Successive moves to restructure the company, culminating in the divestiture of nearly all of the company’s German operations, seem to have returned the company to a concentration on its core activities. Nonetheless, while other companies, including The Netherlands’ Baan Co. and Germany’s SAP, have undergone strong growth in the surging mid-1990s automation and networking markets, Triple P may have missed the boat. With the September 1997 replacement of company founder Fezi Kaleghi Yazdi with CEO Jan Willem Baud, however, Triple P appears to have turned the tide. In 1997 the company’s listing was dropped from the NASDAQ national market; since August 1998, however, Triple P has been readmitted, now to a quotation on the NASDAQ small cap market.
Paper Beginnings in the 1980s
When 36-year-old Fezi Kaleghi Yazdi set his thoughts on paper for the formation of a new company in 1988, he was already well known in The Netherlands’ business community. In 1974 Yazdi left his native Iran to supplement his business economics education with technical studies in the United States. En route, however, Yazdi stopped in Holland for a vacation; he never left. While there, he was offered a role acting as a mediator for Dutch business interests in Iran. Yazdi decided to complete his studies in Holland, attending the technical university in Rijswijk, where he studied mechanical engineering.
His studies completed, Yazdi worked a stint with Shell and then joined engineering firm Lummus Crest. In 1982 Yazdi changed hats, taking a position with RSV in that company’s automation department. Yazdi’s position was to make the department more commercial, but he never got the chance. Within days after starting work at RSV, the company declared bankruptcy. Yazdi, undeterred, saw possibilities for his department, which provided computer automation services to the relatively young business computing market. Seeking a means to buy up the department and recreate it as an independent business, Yazdi met Jan Kuijten, a well-known Dutch financier. Kuijten liked Yazdi’s idea, so much so that the pair became partners. The assets of RSV’s computer automation department were combined with those of another automation company, Holec Control Systems, and HCS Technology was born. Kuijten took charge of management, and Yazdi was in charge of technical development.
Yazdi and Kuijten went on the acquisition trail, buying up numerous small automation companies and grouping them under the HCS name. Although analysts would later criticize the company for failing to integrate its acquisitions into a more tightly operating whole, the company nevertheless showed impressive revenue growth. In 1987 Yazdi and Kuijten brought HCS to the Amsterdam stock exchange. With the public offering, Yazdi’s personal fortune was made. Only a year later, however, the partners would split up. In 1988 Kuijten sought to add a new company—held by his personal holding company—to HCS. Yazdi judged the purchase price to be too high and attempted to block the sale. A power struggle ensued; Yazdi, the loser, left HCS that same year.
At the time, Yazdi and Kuijten were criticized by analysts, as reported in the NRC Handelsblad, as “having the goal of making as much money as possible in the short term. Nothing more profound, such as providing optimal service to the customer or continuity. Earning money fast, through acquisitions.” Yazdi himself would admit to the same reporter: “Financial goals were the priority at HCS.... HCS gathered companies that hung together like loose sand.”
Undeterred by his setback with HCS, Yazdi would use the financial lessons he had learned from Kuijten to his advantage in his next high technology venture. In 1988 Yazdi vowed to build a new company, setting his thoughts down on paper for that company’s organization and goals. Yazdi would stick with computer automation, focusing on an area he saw as having strong growth potential in the years to come: the telecommunications industry, particularly its convergence with software systems. By the end of the year Yazdi had succeeded in raising investments for the new company, called Triple P, the Ps standing for People, Performance, and Partnership. Yazdi himself invested in the new company, taking on some NLG 6 million in personal debt and holding as much as 60 percent of Triple P.
Yazdi’s plans called for a repeat of sorts of the ingredients that had built HCS. For the first two years Triple P would concentrate on acquiring the companies that would provide the “basic ingredients” for Triple P’s products and services. The following two years would be spent concentrating the organization and grouping its strengths, while upgrading its product line. The next two years would then be spent taking Triple P on an international growth drive. From the start, Yazdi’s goal was to build Triple P into one of the top five Dutch automation firms. Yazdi, however, claimed to have learned other lessons from his stint with HCS. For one, Yazdi (telling NRC Handelsblad ) would avoid HCS’s mistakes: “With us, forming a tight organization with a clear structure comes first.... A takeover in itself does not mean that you have the business under control, or that you are in position to keep up with developments in the market.” Yazdi also vowed to avoid the stock market and, thereby, stockholder pressures for short-term performance.
Yet Triple P would keep one essential ingredient of HCS’s rapid growth: the acquisition of struggling or failing companies to build his own as rapidly as possibly. The late 1980s and early 1990s, in fact, provided no lack of struggling and failing companies, giving Yazdi a multitude of takeover possibilities. Indeed, the company showed strong progress in its early years. With its collection of companies, grouped in a decentralized organization, Triple P had grown from Yazdi’s 1988 business plan (reportedly drawn up on two sheets of paper) to a company boasting revenues of NLG 125 million in 1991. The company also was showing strong profits—at least according to Dutch accounting requirements. After an NLG 2.9 million profit in 1991, the company’s net profits would rise to NLG 4.2 million in 1992. Triple P’s acquisitions had taken the company into three primary areas of business: data and telecommunications, computer maintenance, and computer networking services.
Meanwhile, HCS Technology was struggling. After the acquisition of a U.S. company, Savin, HCS was forced to declare bankruptcy. The resulting stockholders’ scandal would hurt the reputation of Jan Kuijten and other financiers who had joined in HCS. Because he had left the company more than four years earlier, Yazdi’s own reputation was spared.
Stumbling in the 1990s
Triple P’s acquisition drive had cut deeply into the company’s capital, which had sunk to as low as 14 percent of revenues. The company’s projections for growth had proven optimistic: calls for the company to reach sales of NLG 180 million proved overreaching, given that it took into account the acquisition of a company that, Yazdi would explain, fell through at the last moment. Nonetheless, Yazdi’s optimism continued, calling for profit growth in 1993 to as much as NLG 6 million—despite forecasting a lack of revenue growth. Indeed, Triple P would miss its target of NLG 160 million for 1993, reporting instead a turnover of NLG 142 million. Nevertheless, Triple P also was able to report a net profit of NLG 5.8 million.
At the beginning of 1994, Triple P moved to consolidate its holdings. Judging that its efforts to integrate its various acquisitions had fallen behind Yazdi’s initial two-year plan because of the company’s decentralization, Triple P moved its headquarters and the bulk of its operations to Vianen, where the company took over the office building formerly occupied by failing computer manufacturer Nixdorf. For Triple P, the move remained geographic more than organizational. While business units continued to function independently, the company hoped that the new proximity among business units would encourage greater cooperation.
Triple P is a leading provider of computing and network solutions, computer services and software solutions to consumers located primarily in The Netherlands and Belgium.
By the end of 1994, Triple P’s revenues had more than doubled, reaching NLG 300 million. The company’s payroll also had grown dramatically, numbering some 1,400 employees. Chiefly responsible for this impressive growth was the company’s acquisition of the struggling European division of American automation house MAI Systems. For a purchase price of NLG 10 million, Triple P added some NLG 150 million in revenues, as well as MAI’s business units in Germany, Belgium, France, and The Netherlands, and a second headquarters in Germany. The MAI Europe acquisition was seen as a strategically sound move on Triple P’s part, providing synergy with the company’s existing developments and adding new strengths in healthcare and transportation automation systems to Triple P’s telecommunications focus. At the time of the acquisition Yazdi continued to insist that his company had no plans to go public, preferring to finance its operations privately.
Yet, one year later, Triple P announced plans to pursue a listing on the NASDAQ stock exchange. The choice for the American exchange, rather than for the Amsterdam exchange, was explained by the stronger—some would claim less critical—U.S. interest in high technology stocks. In December 1995, Triple P went public, selling nearly seven million shares—including more than 700,000 of Yazdi’s own shares, reducing his holding in the company to just 44.5 percent—for US$10 per share.
The approximately NLG 110 million netted from the initial public offering (IPO) was sorely needed. The acquisition and integration of MAI Europe had cost Triple P dearly, sending company-owned capital levels into the negative to the tune of more than NLG 64 million. The IPO, conducted according to U.S. accounting requirements, also revealed that Triple P had for years been unprofitable, due to its continued acquisition activity (U.S. accounting methods required the company to write down the cost of acquisitions against its income). In 1994, for example, the company’s balance sheet showed a loss of some NLG 66 million with the U.S. method, compared with what still could be reported as a profit using the Dutch method. Only in the first nine months of 1995—leading up to the company’s decision to go public—did Triple P post a profit according to U.S. standards. With his NLG 10 million share of the IPO, Yazdi was able to pay off his personal debt carried over from the founding of the company.
Triple P seemed to be in good health, finishing 1995 with revenues of more than NLG 347 million and a net profit of NLG 10.5 million. Indeed, as 1996 began, Yazdi was more optimistic than ever, forecasting that the company’s revenues would reach NLG 1 billion within three years, with operational profits of some 13 percent. Fueling this expansion would be a combination of internal growth and acquisition. The company also was determined to shift its focus more and more away from hardware and toward software, a market offering higher profit margins. To fund the company’s expansion, Yazdi proposed a second public offering, now on a European exchange, for later in the 1996 year.
Triple P appeared to have the wind in its sails. By April 1996 the company was able to announce an agreement with Daimler-Benz, in which Triple P would take over part of the activities, clients, and employees of the German automobile manufacturer’s automation arm Debis, chiefly in the area of transportation. The company’s stock price reflected its seemingly bright future, with shares of Triple P climbing to some $15.75 per share.
Four months later, Triple P began to take on water. While the automation market itself was booming and competitors such as The Netherlands’ Baan Co. and Germany’s SAP were booking record growth, Triple P’s turnover had stagnated, and its first-half profits had fallen off sharply—by some 87 percent. One culprit behind the company’s difficulties was a problem with Triple P’s newly developed software package for the healthcare industry: reportedly, the package did not work. The efforts needed to correct the problems with the package would drain millions of guilders in extra costs and lost orders. By August 1996, Triple P was forced to reorganize its operations, jettisoning a number of subsidiary holdings that strayed too far from its core businesses, including a software package for the Belgian automobile sales market and another package for a German beverage distributor, while reducing staff by as much as ten percent. Meanwhile, Triple P’s stock price plunged, dropping to just US$5 per share in August and finishing the year at US$3 per share.
Triple P’s misfortunes had only just begun. In September 1996 a fire destroyed the company’s distribution center. In October the company was forced to cut some 225 employees. The total cost of the reorganization reached some NLG 16.5 million. For the year-end, the company’s revenues remained flat at NLG 347 million, and its net profits had slid to a loss of NLG 2.5 million. By mid-1997 the company’s shares would drop to around $1.50 per share. According to a report by Quote magazine, however, a more critical reading of Triple P’s IPO prospectus might have spared some of its shareholders—for the main part, institutional investors and company personnel—their losses. If only because Triple P had continued to invest heavily in so-called “vertical” software, that is, software designed for a specific enterprise, while the market clearly had shifted to the “horizontal” software favored by Baan Co. and SAP, which could be purchased by and adapted to any client, the company had entered the second half of the 1990s in a weakened competitive position. The Quote article, however, goes further, suggesting that Triple P misrepresented the scope of its activities in its prospectus.
With the release of the company’s 1996 figures in March 1997—including the acknowledgement that the company’s capital had fallen to a negative NLG 1.3 million—Yazdi accepted full responsibility for the company’s failings, admitting that he “had never been a hero in operational management.” Nonetheless, he remained optimistic for the company’s future, claiming a return to profitability by the end of the year. At the same time, Yazdi moved to strengthen Triple P’s management, bringing in Jan Willem Baud, who formerly had headed the Dutch firm Besi, making his own fortune when that company was brought to the stock market. By the end of June, with Triple P’s revenues in free fall, its second quarter losses mounting to NLG 24.8 million, its capital deeply in the red, and the company’s stock price bottoming out at US$1.50 per share, Triple P’s stock was removed from its listing on the NASDAQ stock exchange. At this time, Yazdi announced that he would step down from the company’s leadership in September 1997, after arranging for the company’s refinancing.
Yazdi held true to his promise. In September 1997, Baud formally took over control of Triple P’s operations. Baud’s immediate concern was to steer Triple P through a second and more thorough reorganization, culminating with the sale of most of the company’s German holdings, including all of its former MAI activities in that country. The total cost of this new reorganization would reach NLG 28 million.
Under Baud, Triple P appeared to refocus on its core activities. By the end of 1997 the company again was posting a slight quarterly profit, a trend that continued into the second half of 1998. In August 1998, Triple P was restored to a NASDAQ listing, now on the Small Cap market.
Triple P Belgium NV/SA; Triple P Deutschland, Druck & Ver-lag; Triple P/MAI France NV/SA; Triple P USA, Inc.
Principal Operating Units
Telematics; Computer Industries; Mediasystemen; Services.
Den Tex, Niek, “Pech, Pech, Pech’en nog ‘ns de vrije val van Triple P,” Quote, August 31, 1997, p. 34.
Stijl, Herman, “Triple P overweegt nieuwe beursgang,” Het Parool, February 17, 1996, p. 13.
“Triple P verkoopt Duitse verlieslaters,” Algemeen Dagblad, December 30, 1997, p. 11.
Van Dinther, M., “Rentree Triple P op koersbord van NASDAQ,” Algemeen Nederlands Persbureau ANP, August 10, 1998.
Verbraeken, “Triple P van Amerikaanse schermenbeurs verwijdered,” Algemeen Nederlands Persbureau, June 24, 1997.
Wammes, Hans, “Fezi Khaleghi Yazdi terug in Nederlandse software-zaken,” NRC Handelsblad, October 28, 1994, p. 14.
—M. L. Cohen