Guidance Software Q4 results – a guide to the wider market?

Guidance Software, Inc., which is amongst the sponsors of the e-Disclosure Information Project, has posted Q4 2008 results which are its best quarter’s results in its history, with revenue of $25.2 million. CEO Victor Limongelli was on bullish form in an analysts’ discussion, whilst retaining a sense of caution wholly appropriate to the uncertainty of the times.

Guidance’s results may be a straw in the wind, an indicator of the way things are going. I say that because its market is up at the front of the process which ends in a discovery exercise, a regulatory inquiry or an internal investigation. If you are in mid-case, then you need a review application. If you are starting down that trail, you are collecting data, probably with Guidance’s forensic tools. If you are a large company which thinks you are going to face a need for collections in the near future, then you are buying Guidance’s EnCase eDiscovery or something else whose purpose is anticipatory rather than merely reactive. The report to which I point you above sets out the numbers of Q4 sales relative to previous periods, as well as the interesting statistic that Guidance taught 25% more students how to use its products in 2008 than in 2007.

There is doubtless more than one reason for this. Victor Limongelli points to an easier-to-use interface and better workflow, as well as Guidance’s adoption of a pay-per-use pricing model which allows users to take the product in house without the capital outlay of an outright purchase. When I saw him in Pasadena last Summer, he had just returned from promoting this new approach to the market and was optimistic about it – with reason as it now appears.

Do the figures tell us something more, however, about the coming year? Sniffing the air on both sides of the Atlantic, and in Australia, one gets deeply contradictory messages from both law firm litigation departments and e-discovery suppliers. Law firm layoffs tend to be, fairly obviously, amongst those engaged in M&A and other work at the largely defunct constructive end of the business. Those who specialise in insolvency, or who are involved directly or indirectly in banking and other financial litigation, are either rushed off their feet or are cautiously optimistic – but not uniformly so, or at least not in public. It is fair to say that the ones I see tend to be the ones who are sufficiently interested in handling document-heavy disputes to get in touch with me. My wife, who is a university nurse, might easily conclude that students are an unhealthy lot as a breed, but then she only ever sees the sick ones. Similarly, most lawyers whom I come across must assume that big work is on its way because that is the context in which I meet them.

Meanwhile, the suppliers of e-discovery software and services seem divided between those who are making lay-offs and those who are busier than ever. Many of them seem, at the least, to be seeing an upsurge in requests for quotations and estimates. The people who will be making decisions based on those estimates are those of the kind who contributed to Guidance’s Q4 figures. They are, if you like, the fishing boats out to sea who sense the tidal wave before those on land.

The results may point to something different – that the levels of available work remain the same but that companies are moving away from outsourcing and towards an in-house solution. Victor Limongelli can do no more than suggest that possibility, which is good for Guidance but which says little or nothing about the specific market – unless, of course, you are an outsource collector. The move to in-house working has been foreseeable for some time, and not just for data collections. The law firms which will prosper are those who recognise this trend and ride it by proactively advising their clients as to how they can work together cost-effectively with a new shared division of responsibilities. Those who just wait for the whole job to turn up may be waiting a long time.

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About Chris Dale

I have been an English solicitor since 1980. I run the e-Disclosure Information Project which collects and comments on information about electronic disclosure / eDiscovery and related subjects in the UK, the US, AsiaPac and elsewhere
This entry was posted in Discovery, E-Discovery Suppliers, eDisclosure, eDiscovery, Electronic disclosure, Guidance Software, Litigation Readiness. Bookmark the permalink.

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