US interest in Xero fades

TOM PULLAR-STRECKER for stuff.co.nz writes: Xero shareholders will be contemplating a glass half-full at the company's annual meeting in Wellington today.

Chief executive Rod Drury is expected to unveil its all-important annual revenue-growth forecast, but will do so amid suggestions Xero's push into the United States may be faltering.

Michelle Long, an influential United States accountant who Xero invited to present at its XeroCon conference in Auckland last year, said Xero's momentum in the US appeared to have dwindled.

Long said in October that Xero continued to "impress and amaze" her, but was more downbeat when contacted by Fairfax yesterday.

"Last year there was a lot of excitement and buzz and people were asking about Xero. I haven't heard that this year. I have a LinkedIn group with almost 80,000 members and I haven't seen a question or comment about Xero in months," she said.

Long said Xero's US rival Intuit had asked her to conduct a lot of training on its Quickbooks cloud-based software over the past year.

"I am seeing hundreds and hundreds of people at all these events and when I did training for Xero last year, one of the events they sent me to, there were three people there."

Shareholders were in a buoyant mood at last year's annual meeting.

Xero shares had been trading at $17.30 on the eve of that meeting and are still well up on that price - trading at $23.25 this morning, down 66c during the session. However, they have slid 48 per cent off the high of $45.68 struck earlier this year.

Xero narrowly achieved the goal Drury set out at last year's annual meeting of growing revenues by at least 80 per cent in the year to March. Its sales grew 83 per cent to $70.1 million, 95 per cent of that earned outside North America.

Woodward Partners analyst Nick Lewis said the broker was forecasting about a 75 per cent rise this year, which would put its revenues above $120m.

Lewis said Xero's progress in the US was "pivotal" to its valuation and he had also heard it was losing momentum there.

"You have got Intuit now making aggressive acquisitions of companies that could be very useful to Xero.

"They are aggressively pursuing them in Britain, they are aggressively pursuing them in Australia and they are doing everything they can to block [Xero's] growth in the US."

Despite that, Lewis said Xero remained a "spectacular success story for Wellington."

"The company has done nothing wrong. Rod and his team have executed to plan, with the big caveat they may not get what they think they are going to get in the US.

"Everything else they have done flawlessly. It is the market that has been over-valuing the stock."

Rumours had resurfaced in the past fortnight that Xero might be about to float on the US Nasdaq exchange but Lewis said he would be surprised if it did.