Xenos Corp. Comes to Virginia

By Marianne Dunn, Staff WriterXenos Group Inc., a provider of electronic commerce software and solutions based in Ontario, Canada, opened an office in Sterling, Va., this month to dive head first into the U.S. federal market."To be very successful in the government sector requires a presence," said Marian Lewandowski, Xenos director of marketing. The company will build a revenue stream by "attracting government business." Right now, he said, "we are doing it on an opportunistic basis." Lewandowski said his company has relied on partners, most notably Xerox Connect Inc., an Exton, Pa.-based division of Xerox Corp., for introductions to the U.S. public sector market.During the past year, Xenos and Xerox Connect partnered on projects for Florida's legislative branch and the 13th Judicial Circuit Court of Tampa."Xerox Connect needed to bring in some experts in transformation technology," said Angela Vanderburg, a Xenos marketing representative. Xenos specializes in converting print or data stream into digital output that can run on any media or platform. "We dealt with the customer, but it was a Xerox account," she said. Currently, 67 percent of the company's business is commercial. But Xenos officials are hoping to use the connections made through these projects to penetrate the federal marketplace, Lewandowski said."What we are about to do is leverage into Xerox's sales force, and Xerox has a strong presence in the government," Lewandowski said. One potential customer for Xenos is the Internal Revenue Service, he said. Although the IRS has posted all of its forms on the World Wide Web, Lewandowski said taxpayers have to log on to the site and find the forms they need. Xenos technology, he said, could change that whole process. "The IRS could personalize [the forms] and push it out to each person who has to receive it," he said.But IRS is not the only agency his company will pursue. "Any agency, any department of the government that produces a large volume of mail and delivers it on a regular basis is a target," said Lewandowski. Vanderburg does not expect to land this type of business right away. Even though Deryck Weaver, account manager in the Virginia office, has made some contacts in the federal arena, Vanderburg expects it will take at least one year for government business to pick up. "It is highly unlikely that there will be any direct sales ... in the very near future," said Vanderburg. Right now, the 66-person company with expected 1999 revenue near $7 million, attributes 33 percent of its business for the fiscal year to public sector projects, ranging from state and local to federal, in both the United States and Canada. Bell Canada has adopted Xenos' Documorph software to send telephone bills through the Internet. Using a phone number and a password, Bell customers can access their bills online using any standard Web browser. The online bills will even look like the paper version.The company also is working with Canada Post Corp., the nation's postal service. This project, for which Xenos will not release financial specifics, involves implementing a system that allows Canadian businesses and consumers to receive and view all types of mail on the Internet and pay their bills directly from the service or through their financial institution's online banking facility. In the United States, Xenos has established offices in Dallas; Monument, Colo.; and Wilton, Conn., to handle business from clients including AT&T, Merrill Lynch, Chase Manhattan and Charles Schwab.Lewandowski estimated that Xenos generates about 90 percent of its business from the United States.During the past three years, revenue has climbed steadily. In 1997, revenue was $1.8 million. It rose to $3.8 million in 1998, and Lewandowski expects to pull in about $7.3 million this year.Potential returns from the U.S. public sector market could draw many Canadian companies across the border, said April Young, senior vice president and mid-Atlantic manager for the emerging growth division of Imperial Bank in Palo Alto, Calif."The U.S. and Canadian economies are very tightly knit. Canada is our largest trading partner, and the U.S. federal government is the largest purchaser of goods and services in the world," said Young. "So when ambitious entrepreneurs in Canada start looking around, this is a very natural place for them to look." Xenos also is following the path of other ambitious tech companies by planning an initial public offering. Company officials expected the offering to occur Aug. 9 on the Toronto Stock Exchange. Due to a quiet period surrounding the IPO, company officials could not comment on the offering. They declined to discuss their IPO expectations or how they plan to use the proceeds. Young questioned the decision to go public in Canada when the company is looking to generate business in the United States."Going public in Canada, in some ways that is counterintuitive," said Young. "We see companies that are public in Canada reinventing themselves in the United States, moving themselves from the Toronto exchange [to Nasdaq]."Doug Poretz, principal of the Poretz Group, an investor relations firm in McLean, Va., works with Canadian high-tech companies and also questioned the decision to go public in Canada."If you want to be taken seriously," said Poretz, "you need to move to Nasdaq, because you need professional support."Vanderburg said: "Although we have many offices in the U.S. and the majority of our sales are with clients in the U.S., we are a Canadian company. Strategically, we decided to list on the TSE because we would receive more publicity, and hence a higher profile."