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After several downbeat announcements, including a warning of lower than expected revenue and profits for the year that ended in June (see here), K3 had some brighter news with the announcement that it has secured the first phase of a new order with a UK garden centre chain for its emerging AX-based Gemstone retail ERP suite that could be worth £2m if it is fully implemented. This marks the fourth such first phase deal. If they are all fully implemented they will generate revenue of a c£8m and just as importantly act as reference sites for the new solution.
These early deals are positive but the pressure is on K3 to execute well and maintain the pace of development of the emerging Gemstone product if it is to secure the full value of the deals. The company is walking a tightrope – investment in IP is necessary but comes with a high upfront cost at a time when retailers are reluctant to spend on IT and where they do invest, they do so in stages. K3 really has to prove the quality and value of its offerings to start generating the revenue it needs, especially now that it says it is noticing an uptick in retail technology spending.
