MGI Research

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MGI 360 Ratings: Digital River in eCommerce Platforms APR 7 2017

INITIAL RATING: We are initiating coverage of Digital River in the e-Commerce Platforms Merchant of Record segment with an MGI 360 Rating of 51 and a Neutral outlook. 

OPINION: Digital River is the largest player in its core market with a broad albeit somewhat dated service offering. The company overall revenues of $400Mil are growing modestly at under 5% p.a. (MGI estimates). The revenue for the Platform biz of $330Mil is flat to down as it has been steadily losing market share to more agile competitors. The firm provides an all-in-one commerce platform including order management on a rev-share approach. Revenues are highly concentrated with a few key customers, e.g. Microsoft (25%). The lack of modularity, an outdated architecture, perceptions of high prices are all challenges that the management team needs to address. The company has attempted a re-structuring but sales of assets have not generated resources needed for a true turn-around. 

The best use case for DRIV is for mid to large customers looking for fulfillment of physical and digital product mix on a global scale.
Digital River pioneered the Merchant of Record (MoR) industry. In addition to several MoR platforms the firm operates Digital River World Payments and acquired several platforms to cover the entire market from small, self-service merchants to large enterprises. The firm has a unique capability to handle a mix of physical and digital goods. Company still faces acquisition integration challenges and battles market confusion and internal competition. In 2014, after the loss of Symantec account and risks to its Microsoft relationship the company was taken private by Siris Capital.
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MGI 360 Ratings is a comprehensive system for evaluating technology companies. IT organizations use MGI 360 to track suppliers, assess purchasing risks and identify promising new vendors. Vendors utilize MGI 360 to track their markets and evaluate partners. Institutional Investors use MGI 360 for independent assessment of tech companies. MGI 360 ratings help lower costs, save time, reduce risks, and identify new opportunities. The MGI 360 ratings are on a scale from 0 to 100 and reflect company opinions of MGI analysts in five key areas on a scale of 0 to 20:
  • PRODUCT: How strong is the product competitive position 
  • MANAGEMENT: How competent and experienced is the management team 
  • CHANNELS: Does the company have a sales capability and channels needed to bring products to market 
  • STRATEGY: Does the company have a realistic view of the opportunity and a compelling strategy for success 
  • FINANCE: Is the company growing and profitable. 
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