eFuture Continues to Diversify Its Revenue Base

e-Future (EFUT) looks to continue to diversify their revenue base with the help of the constant (and positive) cash flow operations they receive from their software maintance fees (previously discussed here). In the last three weeks e-Future has made two significant announcements which will continue to carry out their growth plan.

The first announcement (link) was the acquisition of a small (40 employees) software and logistics company, Proadvancer Systems Inc. The addition of Proadvancer to the e-Future lineup is significant because not only does it immediately provide them with new customer contacts to sell existing software owned by e-Future, it also allows e-Future to provide logistic solutions to the 1000 plus customers e-Future currently has. To date EFUT’s management team has shown that they are not just out to buy companies for growth but to make synergistic relationships. This is perhaps the best example of that so far. e-Future will now be able to provide logistic solutions in integrated logistics center construction management, supply chain management and logistics model consulting and logistics information management systems planning, design and strategy. e-Future will no longer simply sell and maintain software important for inventory control and efficient retail sales, but will now be able to provide complete services without having to subcontract help on the logistics management side.

The deal is expected to close in August and be accreditive to earnings this year. The terms of the deal were not announced. I have e-mailed IR about this and have been informed that details will be shared during their up coming quarterly conference call. However, we should recall that during the last quarterly conference call it was asked if cash flow operations and current cash on hand would be enough to fund future acquisitions throughout 2008 and the foreseeable future and the answer was yes. I believe that this means that the addition of Proadvancer will have no impact or at least very little impact on share count and dilution.

The second announcement made to continue to diversify their revenue stream was the announcement of a new website tailored to the small to medium-size suppliers and retailers business to business [B2B] industry. The new website, http://www.jindian.com.cn, is a 100 day pilot site that will work in connection to their www.99114.com website. e-Future’s growth via internet revenue seems to be very strategic considering it was recently announced that China has now tied the US for internet users and traffic. In addition, the growth of retail in China is very strong and will continue to require technology to help reign in inflation and manage inventory. First quarter retail sales for China just came out and showed a 20.6% year over year growth in consumer goods in the first quarter.

Disclosure: Long EFUT