Good analysts like to build up a picture of a company in the...

Good analysts like to build up a picture of a company in the broadest sense. The P&L says quite a lot and so does the B/S but the feel of the company, its evolving history, how it’s run, who it recruits and of course its edge or point of difference should all be thrown into the mix.

They are all important and some would say the early numbers are far less a guide than the strength and focus of the vision.

In the tech space a solid grip on a company can be difficult as the competition is global and its especially difficult in the case of Netlinkz where the concept is literally hard to grasp. It is all software and at a level of sophistication and complexity that even some software engineers find demanding.

In this case we can take up the second or third leg of story at the point when Netlinkz comes to an agreement with iSoftstone which - in itself - is somewhat surprising. After all, iSoftstone is the Chinese equivalent of Accenture and has 70,000 staff world-wide and an office in Seattle, the home of Microsoft and Amazon. This fact alone tells us something about the level of sophistication. Here’s a Chinese company apparently thriving on the US west coast (and New York) as well as across China, India, Malaysia etc. Why does it work with a small ASX listed company? True, iWebgate won the Global Security Challenge award sponsored by the Obama Administration and received in kind support from Northrup Grumman for a year, so it wasn’t any old software, but the company itself was very small, obscure with its revenue potential vague at best.

However, from the Netlinkz perspective this partnership must have looked very promising indeed. Here were hundreds of well-trained software engineers – the older ones often graduates from Caltech or MIT etc - but able to draw on the best of 60,000 or so IT graduates a year in China. It was far from being the only large IT consultancy in China, but it was long established and worked with top tier firms in China. We heard at the time that iSoftstone had clients like Sinopec, Pin Ang, Alibaba, JD.com, China Telcom, thethe top four banks etc so Netlinkz had entrée into the top tier of China’s business world.

But prior to this it had become clear than the mobile version wasn’t able to cope with the numbers in China so a team at iSoftstone, some employed by Netlinkz directly through its wholly owned foreign entity, got to work and over 4-5 months produced a far more expandable product with more features.

We never heard what the precise limitations were of the original version, but after just 4-5 months we discovered that the new version had “hyper scalability” to the point of almost limitless connecting points or nodes as well as extreme speed. Soon after as Covid struck China we learnt that the software was being used for health network developed in Beijing to provide secure and flexible communication across the city. JD.com was mentioned as one of the partners in this project.

For the Hot Copper hacksters this didn’t mean much as they more interested in abuse and seem to have no comprehension of the capacity of the software, but to others it was very intriguing as on the face of it opened up almost limitless possibilities not just to connect health workers with patient records, but to connect devices anywhere in the world quickly and cheaply. These devices could be phones, tablets, desktops, or a wide range of internet connected sensors as in security cameras, stoves, fridges, warehouse shelves, containers, pallets, trucks, cars etc.

It also meant that services could be offered for off-site data stored in the conventional “cloud” or as was being proposed at “the edge.” Companies may not need to transfer massive loads of data to AWS, Azure or Oracle’s cloud services, but could select what was critical and mix and match cloud services to have more economical security. (Why help fund the Bezos space travel or his divorce settlement?).

This alone opened-up many opportunities for network consultancy and data management. In one stroke we began to see that this could be a lot more than simply selling software on a fee per user basis. The confirmation of this came when the VPN-2 was selected for the Sichuan water project under the supervision of the World Bank . China Telecom and Huawei are the technical partners so we now see this apparently obscure software operating at or above the levels of Cisco, Juniper or Arista.

According to one large shareholder Sichuan (or the Chengdu project as some call it) is, or was, not free of difficulties with its 25-30,000 sensors, but now that the full network design is finalised and perhaps the whole project is close to completion, its will be a strong reference case for marketing. The World Bank is funding about 60 water projects world-wide - most much more simple than Sichuan – but Sichuan-Chengdu’s high profile and complexity illustrates how software networks of connected “things “ can be done on this scale.

But bringing things up to the present moment, what’s the current situation with the partners taking the software to Malaysia, the Middle East and Europe and the current status of things in China?

One simple way to gauge what’s going on is to check the staff numbers in China. Netlinkz management is not able to brief individual shareholders about future material events, but there is nothing wrong with confirming current facts. (As a relatively small shareholder building a decent holding I simply asked). As it happens there are about 130 on staff currently and it has 77-78 paying clients of various sizes.

Who these clients are precisely is gagged by non-disclosure agreements, but the new web-site’s video gives a few hints. We see goods being delivered by an e-bike through side-streets, a drone lifting a parcel to an upper apartment, emergency health workers down-loading patient information an ambulance, wind farms generating data and what looks like a fully automated, fully networked auto production plant. In other scenes robots whip up and down warehouse aisles.

The 130 staff are spread across Beijing, Shanghai, Shenzhen, Chengdu and 3-4 other cities which in itself says something about the number of live projects that must be under way or perhaps completed.

Apart from the mentions of work-from-home connectivity, the major markets are now listed as health, manufacturing and utilities. Logistic applications are also prominent in the scenes shown. That should strike a chord for investors who remember past references to the purchase of servers and the oblique mention of JD mentioned above as the pandemic spread across China.

As for whether JD actually is one of several major clients I’ll leave that for shareholders to personally research, but conclude by suggesting there could be several JD related projects as JD in recent years spun-off JD Health International (US$2.4 billion today) and JD Logistics ($14.8 billion)

This is not to suggest that shareholders rush out and buy more simply on the possibility that China’s largest retailer and one of its largest logistics group is a major client, but when we get clear confirmation that the JD or its subsidiaries is a major client, it may be a good idea.

The image of the drone delivery is certainly interesting especially when you read of plans by JD to lift its drone numbers to one million by 2025. That will be networking on a large scale.