New Zealand Herald: Straker Translations shares explode on IBM deal
Shares in NZ-based, ASX-listed Straker Translations surged by as much as 80 per cent to A$1.64 following news of a two-year deal with IBM (the stock closed up 76 per cent to $1.59).
No dollar value has been attached to the deal, but co-founder Grant Straker says the contract, which runs from January next year, is "transformative".
His company is increasing its headcount by a third to accommodate its new business with Big Blue.
Straker is currently advertising for 40 new positions. Around 10 will be in Gisborne, where the North Shore, Auckland-based company opened a satellite office for staff after cheaper housing.
The gain is relative. Today's stock price jump, which takes Straker to an A$89m market cap, saw it pull ahead of its September 2018 listing price of A$1.51 after prolonged trading below that mark. However, it remains below its all-time high of A$2.10, hit in July just year.
Straker Translations, founded by one-time paratrooper Straker and his wife Merryn in 1999, has long had a relationship with IBM, using the US company's AI platform and cloud computing service.
But it became a two-way street last year when Straker acquired a Barcelona-based rival, MMS (one of seven acquisitions of small translation players), which supplied Spanish translation services to IBM.
Now, from the New Year under the new deal, Straker's RAY platform will directly link to IBM's technology platforms to provide translation capabilities across 55 languages for Big Blue's Adaptive Translation Services.
In an ASX filing, Straker said the revenue generated by the deal would be "material" but also impossible to quantify at this point because of the nature of the deal, which will see remuneration based on time, and whatever volume of translation business it ends up generating.
Straker's financial year ends on March 31. The first impact of the expanded IBM business will be seen in the final quarter, Straker says.
There are a number of free translation services, from Google and others, Straker says his company uses superior artificial intelligence, then fills in gaps with its secret sauce - an army of 13,000 crowdsourced humans.
Straker estimates the language translation market is worth some US$57 billion per year, but says it's highly fragmented with hundreds of small players. Allying with a tech giant like IBM is one way for his company to stand above the crowd.
In a first-quarter FY2021 update, Straker Translations said it annualised revenue rate was tracking to $30.7m.
Total customer receipts were up 13.1 per cent to $6.9m but total cash flow was -$2.5m after earn-out payments and increased R&D spending.
Straker's cash balance was $8.7m as of June 30.
The company took $409,000 in Covid wage subsidies.