Sunday, January 4, 2015

The Real Size of the U.S. Market Potentially for Xero? 9-12 Million, not the 28-35 Million Xero Claims...

Excerpted from Xero Struggles for Traction in the U.S.:   We wrote a response to a DigitalFirst interview with Xero CEO Rod Drury wherein we illustrated how Xero uses "smoke & mirrors" to construct a narrative of their position in the U.S.  that is essentially an "illusion".   We noted a key Xero tactic and practice  is how CEO Rod Drury and other top executives  verbally float a number between 28 Million and 35 Million, describing it as a "market" in the U.S. for Xero when in fact it's nothing more than Xero's conjectured pool, pure speculation, and not a 'market' at all (the difference and distinction being tremendous).  We said no such market exist in the U.S. and Xero uses the tactic of repeating a non-fact enough times to where the perception of what is fabricated transforms into uncontested fact.  We have no idea where Xero gets their numbers or why sometimes it's 28 Million, and other times it's 35 Million, the number fluctuates and drifts depending on who's speaking and when.  All we're confident of is it's preposterous.
Here is a recent quote from Xero Chairman Chris Liddell in context to the U.S. on this topic and an example of how it generally goes from Xero, 
"There's 35 million who do something else (other than use Quickbooks), whether it's Excel spreadsheets or pieces or paper or localised software, so it's not only competing with Intuit, you're competing for people who've never had software before."
This is pure smoke and mirrors, "illusion making", we believe motivated to pump up Xero stock and grease the wheels of Xero U.S. IPO aspirations.   But just how big of a "whopper" is this "35 million" number?     We finally can place some perspective on that and have come across a credible source of an accurate picture/profile of the size of the U.S. market for Xero, New Zealand Financial Analyst firm "Woodward Partners".    Woodward Partners are quite  knowledged on the Xero tactic of floating huge numbers with the innuendo being a tremendous "pot of gold" to be had for even a small percentage of the market.  On this point and Xero tactic, Woodward Partners has recently said this (click the link to listen to the Radio New Zealand interview)
 "It's convenient to say that we have a small percentage of 29 Million and our competitor has a small percentage of 29 Million but we would argue that 29 Million is overstating the actual opportunity, the opportunity we believe to be 9 - 12 Million".  - -----Nick Lewis, New Zealand based Analyst 
Woodward Partners  (@ 0:38 into the interview)

To be clear, Woodward Partners is not talking about this "mythical white space" number in the U.S., their view is the U.S. market for Xero in total on a low is 9 Million, on a high 12 Million.    Woodward Partners goes further to say,    "There is not enough evidence to support the premise that Xero should be in the U.S." - Nick Lewis, New Zealand Analyst with Woodward Partners  (@ 1:27 into the interview)
Listen to Nick Lewis ( 4 min 10 sec - click to listen )


Post a Comment