Dot-Com Fusion: Allaire's David Orfao

VARBusiness: I understand that you just returned from an extended road show. Your stock didn't fare so well in April, but you've bounced back somewhat and are around $40 per share. Take me back to the road and set the scene.
Orfao: In 10 days we met with 55 institutions. We were doing it right as Nasdaq was melting, so a lot of people we were presenting to were under their desks with their helmets on.

VB: They must have had ashen faces.
Orfao: You should have seen the guy from Janus Fund. He was up 45 percent in January and down 25 percent when we met with him. These kinds of swings prompt these guys to put on their armor suits and go looking for companies that are going to survive. We had a strong story to tell, thankfully. We had strong sequential quarter growth of 45 percent, 200 percent year-over-year growth and profits. They definitely listened to us.

VB: Were people otherwise panicking?
Orfao: I don't think anyone was panicking. A lot of the discussions we had opened up with, "What do you think of the market?" Interestingly, some said the crash of '87 was better because it was fast. It happened within two days, and then the market pulled its pants back on and moved on. This adjustment keeps lagging. It's like the Chinese torture test. Drip, drip, drip. That's trying for some of these analysts who are young and have never seen some of this market volatility before.

VB: What sets you guys apart?
Orfao: What's different about Allaire's platform is that we solve more intranet problems than actual dot-com problems. What's interesting to systems integrators from the standpoint of Allaire is that not only can they go after the dot-com side of a business, but they can also build and deploy the enterprise portal, too. That's where the majority of our revenue is coming from, by the way.

VB: Do you get the sense that integrators are starting to winnow down the number of vendor partners they are playing with?
Orfao: There's a couple of things driving that. Two or three years ago, people were looking for best-of-breed point solutions. Now they are looking for a platform that combines all the elements, whether it be content management, e-commerce, collaboration or the key infrastructure that it takes to build and deploy these applications. What will happen is that the best-of-breed applications will still have a market, but they have to move up in terms of functionality.

VB: How many solutions partners do you work with today?
Orfao: We work with about 1,010 interactive agencies and systems integrators. That's everything from small Web shops all the way up to Ernst & Young, Andersen and Computer Sciences Corp.

VB: I came across a press release about your company and FAO Schwarz. What was interesting was how MarchFirst, your e-business consultant there, helped the customer select the software. How are these organizations helping to brand you to end-user customers?
Orfao: I've had the pleasure of being part of Allaire for four years now. When I got here, the premise and overall strategy for partnering was to build what we call an Allaire industry or Allaire economy. When the company started, we were pretty much selling products over the Web. What we wanted to do was move from that focused strategy to a strategy where we had worldwide partners. Why we wanted partners in our strategy mix was to build barriers to entry for new players coming in, but more important, allow our customers to have more focused direct support in any geographic area.

Four years ago, Allaire was a direct-over-the-Web business. Now it is a business with more than a $100 million run rate per our last quarters, where 62 percent of our revenue goes through partners. That's not by accident; it was very specific in our thinking. This has allowed us to be one of the first new economy companies or infrastructure or platform companies that has actually shown a profit. We've done that in the past two quarters and we'll continue moving forward.

David Orfao, 41, president and CEO, Allaire Corp.

HQ: Cambridge, Mass.

Employees: 300

1999 sales and growth: $55.2M, up 158 percent

1999 loss: $5.5M, or 48 cents per share (diluted)

Market capitalization: $1.16B (May 22)

Stock price: $42.94 (May 22)

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