SURVIVING THE SLUMP: Cyril McGuire keeps a statuette of a bear to remind him of current conditions, writes Jamie Smyth.

Trintech's chic new office in the South County Dublin Business Park in Leopardstown betrays the firm's status as one of the premier Irish dotcom darlings. Like many of the Republic's emerging technology firms, Trintech spent big during the boom. Fancy office blocks were just part of the story. The firm also went on an expensive acquisition trail buying up four firms using its shares as a currency to build a multinational electronic payments company with offices spread across Europe, the US, Latin America and Asia.

The fat press-cuttings file - provided for guests in the lobby area - documents the company's rapid rise over the past three years with articles detailing the multimillion euro deals, high-profile appointments and Trintech's successful initial public offerings. Not surprisingly, however, the file is pretty thin on Trintech's turbulent recent history. After all, job cuts, management reshuffles and a traumatic share price collapse is not the kind of material that impresses company executives coming to do business.

Such selective interpretation doesn't cloud the thinking of Trintech co-founder and chief executive Mr Cyril McGuire, who was recently elevated to the top job by the company's institutional shareholders to get a grip on spending, and propel the company back into profit. Just in case he forgets the depressed state of the technology market, Mr McGuire keeps a statuette of a bear in his office to remind him of current market conditions.

"There is no question this is a bear market," says Mr McGuire. "But one of the advantages I have is that I've seen the bad times before.

"When I took over I had to stabilise our revenues, and I reviewed all the businesses and took action to right-size the business. I have done that in the last couple of months. Revenues have stabilised."

Unlike some of the other technology firms that rushed to prominence in the late 1990s, Trintech has been around since the late 1980s when it was founded by the two McGuire brothers, John and Cyril. Specialising in point-of-sales electronic payment retail devices and software, it grew steadily until it became infected with the zeal of the dotcom boom, transforming it from a $30 million (€30.6 million) minnow in 1998 to a billion dollar firm in three years.

When the bust eventually came, Trintech shares crashed from a high of $75 to their present level at around the $1 mark on the Nasdaq exchange. In the process, the two McGuire brother's paper wealth plummeted, knocking them off the media's rich lists.

The company's revenues also fell dramatically as customers cut their IT budgets. In the six months to July 31st, 2002, Trintech's revenues slumped to $20.9 million, down from $35.4 million on the same period during 2001. Its current market capitalisation is about $20 million, below the $50 million in cash reserves on Trintech's balance sheet.

Focusing on Trintech's half-year results does not show the current picture however, says Mr McGuire. "To compare against 12 months ago is not reality. My cost base is half what it was. . . So look for sequential growth in our revenues and then look at sequential reduction in costs and cash burn," he says.

Trintech's revenues have stabilised at about $10 million over the past two quarters and will probably come in north of that in the present quarter, says Mr McGuire, who has changed the firm's strategy to follow profit rather than aiming for growth at any cost.

"We feel we still are on track for pro forma break-even by the year end and profitability from next year," he says.

Trintech's operating expenses were $9.5 million in the three months to the end of July 2002, down from $23.6 million in the same period of 2001, reflecting this more prudent strategy. More than 300 redundancies over the past two quarters have reduced the firm's workforce to about 420 people, accounting for the majority of this saving. "I think we are close to our \ target now," he says.

Mr McGuire admits Trintech made the mistake of growing too quickly during the hype of the dotcom era. But he says there was little management could do to slow down with shareholders, analysts and the media all pushing for rapid expansion.

"We were dealing with our investors and they were telling us go and expand, go into new markets, win market share, be first and be the winner. Winner takes all. There are no prizes for second," he says.

"I remember sitting down with analysts and they were asking me how many people I had hired last quarter. . . What do those very same analysts say now? Cyril, how many people did you fire last quarter? Are you still in denial? Are you right-sizing your company right now? Not the next quarter, whoever is first to right-size will survive. Same guy.

"You had analysts behind Chinese walls but \ were as optimistic, even more optimistic than the management team. I remember my task with some analysts was pulling them back with their estimates. . . If they were more optimistic they could get more fees because in some respects you want to go with the investment bank that thought, 'hey guys, this will rocket'. You will hardly go with the guys that say 'we think that market is dead'."

But the acquisitions made during the boom will still hurt Trintech's bottom line for some time. Earn-out options agreed with the shareholders of three of the firms it acquired during the hype could potentially cost several million over the next few years, according to recent documents filed with the Securities and Exchange Commission.

The largest of these - worth $2.5 million - is due to be paid to the shareholders of Checkline this year if certain performance targets are met. This comes during a sharp slowdown in the German retail sector, one of Trintech's major markets. This has caused revenues at its point-of-sales division to slump.

Lower sales following the introduction of the euro this year have compounded the problems, causing inventory levels to double to $6.2 million in six months.

However, Mr McGuire believes point of sales remains a potential cash cow for the firm. In January 2005 there will be a major one-off investment when all banks have agreed to put smart chips in their credit cards. This will require all the electronic points of sales to be smartcard ready and will offer us sales opportunities, says Mr McGuire.

"I am very confident and optimistic for technology in our area. Electronic payment is the technology of the future. The enemy of the electronic payment is cash, or the greenback, and you only have to look at the massive growth in credit cards, loyalty cards, debit cards and mobile payments.

"We are hugely focused and motivated to do that and the reason is I am almost a 20 per cent shareholder so if I do return shareholder value in terms of getting the company back to profit then I would benefit personally."

Mr McGuire's personal shareholding is undoubtedly an incentive for him to work to make Trintech successful. But it also threatens to derail the board's plan for a $5 million share buyback to boost the company's share price above the $1 level on the Nasdaq - the level at which a firm may be threatened with enforced de-listing.

After recent share purchases, he holds 19 per cent of the firm's share capital while his brother, John, holds a 15 per cent stake. Under the rules of the Irish Takeover Board companies, where the board holds more than 30 per cent of a firm's share capital, must make an application for exemption from making a bid for the entire company.

Although Mr John McGuire - the technical brains behind Trintech - left the board last month to pursue other interests, his family relationship with Mr Cyril McGuire could potentially cause technical problems for the buyback.

There has also been speculation about the ownership of a company called Instove Limited, which holds almost 10 per cent of Trintech's share capital. This company, in turn, is owned by two Jersey discretionarytrusts called Hacke Trust and Belte Trust. Messrs John and Cyril McGuire disclaim any beneficial interest in the shares held by Instove. According to documents filed with the Securities and Exchange Commission in the US, the trustees of the vehicle may select any beneficiaries they choose. Mr McGuire says he does not know who is the beneficiary of the shares held by the investment vehicle.

Shareholders will hope the takeover panel approves the buy-back scheme and, as a result, the share price remains well above the $1 mark. This would enable Trintech to concentrate on boosting revenues and achieving profit.

A decision is expected shortly from the Irish Takeover Panel.