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Advent Software possesses strong growth potential, with a very large untapped potential market for its core Advent Office products and its high-end Geneva offering as well as strong recurring revenue from Rex, its Internet-based automated reconciliation application. We also believe Advent is finding success increasing its market share as well as closing multi-product sales. We reiterate our BUY rating.

In June, Salomon Smith Barney Equity Prime Brokerage signed up for Geneva. And Advent is increasingly signing bigger deals by targeting larger financial institutions and is more focused on closing sales that include more than one product. Since only about 15 percent of the company's customers are using more than one Advent product, a significant opportunity exists to sell additional products and services into the installed base, which further drives potential upside to earnings going forward.

Advent has over 5,400 customers and is the leading provider of portfolio accounting software and Windows-based solutions for the investment management industry. Advent develops and sells software, consulting and support services, data interfaces and data to investment companies. The flagship product remains Axys, a Windows-based client/server portfolio management system targeted at large- and mid-sized investment managers. Advent generated $71 million in revenue in 1998. The company does little business outside the United States.

Advent continues to penetrate companies of all sizes, selling its software to small-, medium- and large-scale customers. The company has an excellent opportunity to provide Rex to its customers. As Advent signs up more custodians, we expect more clients to look to Rex for reconciliation processes, leading to more dependable, recurring revenue. Deals for Geneva, a global portfolio accounting system for larger money managers, could be in the seven-figure range and should provide Advent with an excellent opportunity for growth going forward. Advent's newest product is Advent Corporate Actions, a Web-based notification service that automates the process of manually tracking corporate actions. That should also provide a nice recurring revenue stream. The company apparently has not seen any slowdown related to Y2K issues, and we do not expect to see any going forward.

We continue to believe that the fundamentals at Advent remain very strong. Sales of new products into the existing installed base should continue to propel earnings forward.

Meanwhile, we expect Advent's balance sheet to remain extremely healthy, including a substantial increase in cash as a result of the recent secondary offering.

by Neil J. Herman