Well, so far it's been an interesting experience," is how Melbourne IT CEO Adrian Kloeden described his first few months at the helm of Melbourne IT, one of Australia's genuine yo-yo technology stocks.
Kloeden came from a completely different breed of company prior to joining Melbourne IT. His most recent previous appointment was as managing director of Woolmark, a company specialising in wool innovation, branding and information. But there are a number of facets to both businesses Kloeden could identify with. Domain names, like intellectual property, are an intangible commodity. The products are subject to fluctuating patterns in demand, and the position revolves around the management of rising and falling revenue streams.
As both chief operating officer prior to Gerrand's departure and now in his current role as CEO, Kloeden's focus has been directed toward bringing a renewed focus on reducing the company's cost structure.
"The role involves taking a business that perhaps let its expenses get ahead of its revenues," he said.
In the last few months, Kloeden has overseen the reduction of any unnecessary costs in peripheral areas and non-revenue generating divisions such as administration. He has also reduced staffing by about 30 per cent, mainly management positions, as he believed the company had too many managers for its size. But he maintains that the company's costs will be stripped back considerably without needing to abandon any business areas.
One of Kloeden's new roles is to change the industry's perception of Melbourne IT as a company. There is a common characterisation of Melbourne IT as being exclusively a domain name business, at a time when Kloeden is driving the company into several new areas of business. Aside from its primary revenue source as a domain name registrar, Melbourne IT has been testing the water in the fields of telecommunications software development and research and development incubators, and is currently negotiating exclusively with the International Corporation for Assigned Names and Numbers (ICANN) to be the sole registry for the new .biz Top Level Domain.
Melbourne IT's foray into software development is on the back of a 50/50 joint venture agreement with Scandinavian mobile network giant Ericsson. Named ASAC (Advanced Software Applications Company), Kloeden expects the joint venture to yield significant international revenue opportunities, and will be incorporated as an unlisted company in January 2001.
Melbourne IT also holds a 35 per cent shareholding in Information City Victoria, a Melbourne-based incubator partly funded under the Government's BITS (Building on IT strengths) program. "The purpose of the incubator is to give assistance to new entrepreneurs with IT or software ideas," said Kloeden. "It is only a small funding commitment on our part and only a small part of our business, but it gives us significant opportunities for the future. We plan to benefit from the flow of innovative ideas."
But the biggest feather in Kloeden's cap at present is NeuLevel, a joint venture with American company NeuStar, which was recently successful in an expensive bid to become the registrar for the new top level domain, .biz. The bid was headed up by Melbourne IT's Clive Flory and resulted in the right to exclusively negotiate the terms of registration for the only new top-level domain set aside purely for business use.
"Of the 46 applicants, 15 were related to business, but .biz was the only one accepted," he said. "It's quite a win to have the right to negotiate exclusively over that area."
Kloeden argues that use of the .com domain is so widespread among areas unrelated to businesses that the new .biz domain is likely to be a very successful venture for Melbourne IT. But he concedes that not every company is going to need a site on the domain name, but will still need to look at ensuring no other parties take the name and threaten the company's branding.
"One of the purposes of registering a domain name is not just to have a site, but to protect brand name and identity," he said.
Subsequently, the company is moving into value-added services around the domain as an additional source of revenue. Melbourne IT now offers corporate domain management services to those companies that, for example, might have domain names in over 100 countries and find it difficult to manage their portfolio.
Even if Melbourne IT can't pull off significant returns from the NeuLevel .biz registry, as a domain name registrar Kloeden sees all seven new top level domains ICANN has approved as opportunities for significant increases in revenues.
Kloeden is hoping these revenue increases will revert Melbourne IT's position in the market back to the level of its halcyon days before the stock crash, when the company's share price was sitting at over $15, as opposed to its current price, which is hovering around $1.30.
"Melbourne IT has joined its industry peers in suffering under the current state of the market," he said. "I'd love to know how the market will move in the short-term but it's too hard to predict. What I'm interested in is driving a business strategy that is accepted by the market. In the short term, there will always be volatility. In the long run, the market will reward success."
During the year 2001, Kloeden will be committing Melbourne IT's resources to the setting up of the new .biz registry, but apart from this obvious business direction, he sees the technology market as too turbulent to be able to predict the fate of the company over the coming 12 months.
"The market is always undergoing change and always will be," he said. "This year it was volatile and I expect the same thing next year. We just have to set our business strategy in such a way as to add significant value to the Internet. In the meantime, I am enjoying being involved with a company that is taking Australian innovation to the world."