Doubts remain on robustness of new Norkom

Business Opinion:  When you look at the all-star cast that makes up Norkom's share register it's hard not to believe the soon-to-be-floated technology company is on the cusp of greatness.

Leading the posse is chairman Shane Reihill, a scion of the Tedcastle dynasty and the main force behind the family's venture capital interests including Trinity Venture Capital, which has a 37 per cent stake.

Also on the list is Denis O'Brien, the founder of Esat and arguably the most successful entrepreneur of his generation. He owns just over 4 per cent. Kieran Nagle, the founder of Kindle, Ireland's first substantial home-grown software business, has just under 1 per cent. And then there is Gavin O'Reilly with 0.16 per cent.

However, the pathfinder prospectus for the initial public offering (IPO) due later this month, which was circulated last week, does not quite live up to such expectations.

It tells a familiar tale: a profitable but small business in sales terms coming to the market with a big technology company multiple. There are a handful of big clients and the main assets are intellectual property.

At one level the story is a very simple one. Norkom provides software that helps banks monitor money laundering, fraud and similar activities. This is, needless to say, quite a good area to be in as long as the United States and its allies continue to wage the global war on terror, and as of this week there is no sign of a let up on that front.

How Norkom's software actually works is another story. It is of course extremely technical and probably beyond the ken of the average investor. You are in effect being asked to rely on the judgment of the chief information officers of the various banks, including HSBC and Standard Chartered, that have bought it.

They, one assumes, have had a good look at it and formed the view that it's a good product that fulfils a real need at an economic price.

In terms of what the future holds for Norkom the prospectus is not a very inspiring. The €30 million proceeds of the IPO will be used to expand in existing markets and explore new ones. The company will look outside of financial services and may make acquisitions.

Ho-hum, you may say. But the real story with Norkom in many ways is not its future but its past and yet this merits only one page of the prospectus. It tells how Norkom has transformed itself from a customer relationship management software company into a crime prevention software business.

The trigger for this was the collapse of the dotcom boom in 2000, which knocked the market for these products for six and resulted in Norkom's original IPO being pulled.

The reinvention of Norkom is a terrific Irish business story and it is a pity that it gets treated in such a dry fashion in the prospectus. But there is a good reason for this.

While the turnaround speaks volumes about the character of the company's management, led by Paul Kerley, it raises a couple of other questions.

The first is how robust is the new Norkom. The net question is: can intellectual property that was all about customer relationship management be adapted so apparently easily to do something else? Norkom, of course, might argue there was nothing easy about it. Indeed, they could turn the argument on its head and say this line of questioning is missing the point entirely. What you get with Norkom is a management that can turn intellectual property into money, which is the real trick.

But there is still a wider question raised by all this and it is: what has really been going on over the past four years? Has a robust new business been built out of the ashes of the old one or has old wine been poured into new bottles in an attempt to find an exit for a number of high-profile investors who waded in too deep during the dotcom boom?

The answer will become clearer in the coming days when the extent to which the existing shareholders and management are going to sell down their shareholdings during the IPO becomes apparent.