RTT AG, the big lie.
Realtime Technology (RTT AG) is presenting itself as a technology company but SW is generating less than 24% of the revenues.
RTT is making more than 50% of its revenues as a creative agency. Most of the contents produced are not based on the RTT DeltaGen SW but Maya, a SW developed and sold by Autodesk.
It is strange to see RTT twisting the truth and only communicating on technology to make investors thinking the company is a pure SW company when it is not. Of course, who would invest in a creative agency?
In fact, it explains why there are no dividends, and why the EBITDA (average for the last five years) is very low compared to the rest of the sector: RTT with a labor business model cannot make high margins.
RTT operating margin (TTM) is five times lower than the industry average, net profit margin (TTM) is even worse, there are almost no ROI and ROE, and the PE ratio is more than three times the average of the sector.
Some of the major factors of risk for RTT are competitors’ possible development of substitute products and services, significant change in demand, or loss of key management personnel.
Regarding possible development of substitute products, there are already a few SW more performing than DeltaGen on the market for real time visualization: VRED from PI-VR a company based in Germany, or P3D from Lumiscaphe a company based in France.
Products like DeltaPix that have shown with BunkSpeed (the co-founder left with the intellectual property to set-up another company before RTT acquisition) it is not in phase with market demand, or the visual solution for Siemens PLM that nobody including Siemens is using (BSH released an article where it is announcing they are using another solution), are not relevant and only show a lack of vision and efficiency of RTT to develop suitable products.
Regarding possible development of substitute services, it is already a very competitive market with low margins: There are plenty of creative agencies using Maya and Photoshop SW able to offer the same services, and creative agencies are forecasting difficult times to come for the next two to three years.
Regarding the change in demand for SW, car manufacturers are already switching from visualization to simulation where RTT is not present and will never: This explains the poor results of SW sales.
Regarding the change in demand for content creation; demand in time of crisis is always declining, and a big company with 500 employees is not really flexible especially when its business model relies on human resources.
Regarding loss of key management personnel, key personnel high turn over is another explanation of the poor profitability of RTT.
During the last two years, three top managers have already quitted or were fired, more than six country managers the same, and an enormous number of skilled people is regularly leaving the company.
A top manager was recently fired. He was arrested and handcuffed at RTT, put in custody during 24 hours, and was accused by RTT of things the court finally rejected. He proved his innocence, won his trial, and got important compensations.
RTT is regularly loosing trials against former employees in Germany and in other countries, and the ambiance in the company is so terrible that more and more people are leaving.
If some institutional investors were aware of the situation, would they leave and sell all their stocks?
Siemens Venture Capital apparently sold their stocks in summer 2011 (to confirm: RTT website information regarding shareholder structure is not updated since December 2010).
RTT announced end of November 2011 the repurchase of 10% its own stocks during the next three years. The volatility of the stock after this announce is concerning. Is there a special deal behind the scene?
It would be unfair for the other investors and probably illegal if RTT were making a secret deal at a special price with a venture capitalist leaving, in order to keep this information confidential and make sure the rest of the investors do not panic and do not sell their stocks.
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