MICROS Systems, Inc.

443-285-6000

7031 Columbia Gateway Drive
Columbia, MD 21046
www.micros.com

Sales

$487 million

Business Description 

MICROS Systems, Inc. was incorporated in the State of Maryland in 1977 as Picos Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems, Inc. (References to “MICROS” or the “Company” herein include the operations of MICROS Systems, Inc. and its subsidiaries on a consolidated basis). MICROS is a leading worldwide designer, manufacturer, marketer, and servicer of enterprise information solutions for the global hospitality and specialty retail industries. The information solutions consist of application specific software and hardware systems, supplemented by a wide range of services. The hospitality industry includes numerous defined market segments such as lodging (including individual hotel sites, hotel central reservation systems and customer information systems), table service restaurants, quick service restaurants, entertainment venues such as stadiums and arenas, business foodservice operations, casinos, transportation foodservice, government operations, and cruise ships. The specialty retail industry consists of retail operations selling to consumers both general and specific products, such as clothing, shoes, hardware, jewelry, and other specialty items.

MICROS’s enterprise solutions comprise three major areas: (1) hotel information systems; (2) restaurant information systems; and (3) specialty retail information systems. In addition to its software enterprise solutions and hardware products, MICROS offers an extensive array of support services and products for its hotel, restaurant, and retail information systems. The hotel information systems consist of software encompassing property management systems (“PMS”), sales and catering systems (“S&C”), central reservation systems (“CRS”), and customer information systems (“CIS”). The restaurant information systems consist of hardware and software for point-of-sale (“POS”) and operational applications, and a suite of back office applications, including inventory, labor, and finance management. The specialty retail systems consist of software encompassing POS, loss prevention and enterprise applications.

The Company’s PMS applications are installed worldwide in leading hotel chains such as Marriott International, InterContinental Hotels Group (formerly Six Continents Hotels), Best Western, Radisson, Hilton International (United Kingdom), Hyatt International, Wyndham, Starwood, Four Seasons (Canada), Accor (France), Concorde (France), Thistle (United Kingdom), Federal (Australia), Kempinski (Germany), Mandarin Oriental (Hong Kong), Movenpick (Switzerland), Peninsula (Hong Kong), Ramada Europe, Shangri-La International (Hong Kong), Swissôtel (Switzerland) and Steigenberger (Germany). Worldwide, there are currently approximately 13,000 MICROS PMS installations.

The MICROS CRS is installed in numerous hotel chains such as Four Seasons, Wyndham, Concorde, Equatorial (Malaysia), West Coast Hotels, MacDonalds (United Kingdom), Oberoi (India), Pan Pacific (Singapore), Rydges (Australia), Sokos (Finland), Starhotels (Italy), Sun International (South Africa), Thistle (UK), Tourast (Australia), and Vagabond Inns.

The MICROS CIS is installed in numerous hotel chains such as Four Seasons, Wyndham, Concorde, Equatorial, First, Scandic (Sweden), Peninsula, Hilton International, Rydges, Shangri-La, Sokos, Sorat (Germany), Starhotels, Sun International, Tourast, Taj (India), Oberoi, and Pan Pacific.

MICROS’s restaurant POS systems are installed worldwide. Major table service restaurant chain customers include T.G.I. Friday’s, Cracker Barrel, Metromedia Restaurant Group, Brinker International, International House of Pancakes, Bertucci’s, Perkins, Friendly’s, Don Pablo’s, La Madeleine, El Torito, Eat ‘N Park, Host Services, Mitchells and Butlers (U.K.), Hooters, Marie Callender’s, Ruby Tuesday’s, Hard Rock Café, Corporacion Mexicana de Restaurantes (Mexico), and Whitbread PLC (United Kingdom). Major quick service chain restaurant (“QSR”) customers include numerous franchisees of Burger King, Arby’s, El Pollo Loco, El Pollo Campero (Guatemala), various franchisees of Yum! Brands (Pizza Hut, KFC International, and Taco Bell), Atlanta Bread, Baja Fresh, Grandy’s, Red Rooster (Australia), Panera Bread, Subway, Krispy Kreme, Starbucks (mainly international sites), and Wendy’s. Most of MICROS’s QSR installations are with franchisees.

MICROS’s restaurant POS systems are also installed in hotel restaurants in chains such as Marriott International, Hilton International, Starwood, Hyatt, InterContinental Hotels, Hilton, Swissôtel, Mandarin Oriental, Radisson, Fairmont (Canada), and Four Seasons. Additional significant markets for the Company’s POS systems include complex foodservice environments such as casinos, cruise ships, sports arenas, airport concourses, theme parks, recreational centers, institutional food service organizations and specialty retail shops. Users include Aramark, Anton’s, Delaware North, HMS Host (formerly Host Marriott Services), and various government entities. The Company has installed large POS systems in the Foxwood Hotel and Casino (Ledyard, CT), Grand Casino (Australia), Atlantis (Bahamas), Sun City (South Africa), Harrah’s Casinos, Luxor Hotel and Casino, MGM Grand Hotel Casino and Theme Park, Mirage Casino, Bellagio and The Venetian (the latter five casinos are located in Las Vegas, Nevada). MICROS supplies and services POS systems for users in the complex foodservice environments identified above both directly and through distribution channels, including through specialty reseller relationships with Blackboard, CBORD Group, and Diebold.

MICROS also markets both hotel and restaurant POS systems that it acquired as part of the acquisition of certain assets of Hospitality Solutions International, Inc. (“HSI”) in October 2000. The HSI hotel and restaurant systems products are both Windows® based software products that run on personal computers (“PCs”). Additionally, MICROS is marketing and further developing a POS product that it acquired via the stock purchase of Indatec GmbH and Co. KG (“Indatec”) in January 2001. The Indatec product is a proprietary based POS system with embedded software. Currently, the Indatec product is sold exclusively in Europe and is targeted to small restaurants.

MICROS’s specialty retail solutions are provided through its wholly owned subsidiary, Datavantage Corporation, which it acquired on May 1, 2003. Datavantage has over 200 retail company customers. Its customers include Abercrombie & Fitch, Barney’s New York, Books-A-Million, Limited Too, Michael’s Arts and Crafts, Polo Ralph Lauren, Steve Madden Retail and Shaw’s Markets.

PRODUCTS AND SERVICES

Hotel Information Systems

For the hotel marketplace, MICROS develops, markets and distributes a complete line of hotel software products and services. The hotel information systems include property management systems, sales and catering systems, central reservation systems, customer information systems, revenue management systems (“RMS”), an Internet/Global Distribution System based hotel reservation service called myfidelio.net, and installation and support services associated with the various product sets. The PMS software provides for reservations, guest accounting, sales and catering applications, travel agent accounting, engineering management, and interfaces to central reservation and global distribution systems. The S&C software enables hotel sales staff to evaluate, reserve and invoice meetings, banquets and related events for a property. The CRS software allows hotels to coordinate, process, track, and analyze hotel room reservations at a central facility for electronic distribution to the appropriate lodging site. The CIS software allows hotels to efficiently capture and track relevant information of guests. The RMS software allows hotels to manage room rates, occupancy, and the mix of business between corporate and transient customers. The software systems run on PCs. MICROS also offers an Internet based hotel reservation service via its myfidelio.net service. This service enables corporations, tourist representation services, and consumers to create room reservations directly with designated hotels. This service also allows those hotel properties without internal reservation capabilities to outsource to MICROS the maintenance of their connectivity to the global distribution systems, such as Sabre, Galileo, Amadeus and WorldSpan.

MICROS’s hotel systems run on industry standard Intel®-based PCs. MICROS markets a range of property management systems geared to hotels of varying sizes and operational needs. For larger hotels, MICROS markets a comprehensive suite of hotel software products under the Opera brand name. Opera includes modules for property management, central reservations, customer information systems, sales and catering, revenue management, and quality management. Opera development started in 1996, with the first module introduced in June 2001. Several additional modules have been released to the market, with Opera Reservation System being the most recent application, having been released in March 2003. Opera is designed to run on PCs and large PC based servers. All the products are designed to share a common Oracle® database. Opera will run under these three operating systems: Microsoft Windows® (NT, 2000 and XP), IBM AIX®, and Sun Solaris®. The Opera software suite is deemed an important product line for MICROS’s continued growth in the hotel information systems market. Over 25 hotel chains have adopted Opera and are in the midst of multi-year rollouts. As of June 30, 2003, over 700 hotel sites had installed Opera PMS. MICROS also continues to market suites of hotel software products under the Fidelio Version 6.0 and 7.0 brand names. Version 6.0 is a DOS-based system with over 7,300 sites installed. Fidelio Version 7.0 utilizes the Microsoft Windows® graphical user interface and runs on an Oracle® database. There are over 3,700 hotels using Version 7.0.

For smaller hotels, MICROS markets a product called FidelioXpress. This product operates on the Windows® 2000 operating system and runs on a Sybase SQL database. It uses an innovative touch screen display user interface. It is installed in over 700 sites worldwide. MICROS also markets a suite of hotel products via its Hospitality Systems, Inc. division in Phoenix, Arizona. Over 400 hotels are using various modules from Hospitality Systems, Inc.

The next generation product for European users of Fidelio Version 6.0 and 7.0 is Version 8.0, which is currently being developed in Hamburg, Germany. This product will contain certain Internet based features and utilize the Windows® operating system with an Oracle® database. The product is designed to meet the needs of independent hotel operators and smaller chains based in Europe. In fiscal year 2003, the product was installed in a number of live sites for extended field-testing and is targeted for release in fiscal year 2004.

MICROS markets a specialized version of its PMS product to the cruise industry via its Fidelio Cruise subsidiary. The Fidelio Cruise PMS enables cruise ships to manage their reservations and on-board operational needs including check-in and check-out, point-of-sale, passenger and crew administration, invoicing, maintenance tracking and passport document management. Over 100 cruise ships are installed by Fidelio Cruise. Customers include Radisson Seven Seas, Princess Cruises, P. & O. Cruises, Holland America, and Norwegian Cruise Lines.

Additionally, MICROS has entered into an alliance with Systems Union Group Plc, headquartered in London. This alliance involves the joint product development and marketing of application software based on Systems Union’s back office accounting applications. This alliance enables MICROS to offer a hotel customer a complete suite of integrated software solutions that encompasses operational needs and back office accounting and reporting. As part of this alliance, MICROS serves as a preferred reseller of Systems Union’s software and business solutions to the hospitality industry.

Restaurant Information Systems

MICROS’s restaurant systems include a full-featured point of sale application, encompassing transaction control, restaurant operations, accounting data, interfaces to other systems, communications, and hardware and support services. Most the products are designed to operate on Intel® based personal computers with the order entry terminals being either industry standard PCs or proprietary terminals, including two types of proprietary intelligent terminals developed and designed by MICROS.

The Company’s restaurant POS systems are the 8700 Hospitality Management System (“HMS”), the 9700 HMS, the 3700 POS system, HSI POS, Indatec, and the 2700 HMS. These systems provide transaction control for table service, quick service and large entertainment venues.

MICROS offers POS hardware terminals for entry of restaurant orders. The terminals can either be Intel® chip-based personal computers with additional functionality added for operating within foodservice environments or proprietary intelligent terminals. MICROS’s main PC based terminal workstation is called the Eclipse. The Eclipse was released in June 2001 and serves as the replacement for an earlier PC workstation (“PCWS”) named Ultra. The PCWS is a specialized point-of-sale computer designed to withstand the rigors of a restaurant environment. Sanmina-SCI Corporation (“SSCI”) manufactures the MICROS Eclipse PCWS. It is a color touchscreen based system that offers both passive and active matrix display options. MICROS resells various hardware products such as personal computers, printers, network cards, and other related computer equipment. MICROS signed an agreement with Hewlett Packard Corporation in fiscal year 2000 in which Hewlett Packard was designated as a non-exclusive preferred provider of personal computers, printers, and networking equipment on a global basis. Sales under this relationship began in fiscal year 2001.

MICROS released a new POS terminal in fiscal year 2003, called Workstation 4. This product is a thin-client point-of-sale terminal, utilizing Microsoft’s Windows® CE operating system, with standalone resiliency. This capability means that even if the system server shuts down, the POS terminal can continue to function and store data until the server is operational. MICROS’s Workstation 4 is manufactured by GES Singapore Pte Ltd.in Singapore. MICROS also markets a PC-based POS terminal called the Elite in its Asia/Pacific region. Partner Tech, Inc., manufactures this product for MICROS in Taiwan.

The 8700 HMS, released in fiscal year 1994, and since upgraded to add new features and functionality in subsequent releases, is designed for table service and quick service restaurants in hotels, resorts, casinos, airports, stadiums/arenas, theme parks and larger independent and chain restaurants. The 8700 HMS product has an open systems architecture which allows its use on a PC as the server with the order entry terminals being either the Company’s proprietary order entry POS terminal hardware or MICROS PCWS. The 8700 HMS utilizes the SCO UNIX operating system, which permits multi-tasking and multi-user operations. This architecture gives it the ability to manage any size restaurant or food service operation.

The Company introduced the next generation version of the 8700 HMS in fiscal year 2001, named the 9700 HMS. This product incorporates the feature set of the 8700 HMS, but runs on Microsoft’s Windows® 2000 operating system, and possesses additional features and functionality, including additional reporting tools. The 9700 HMS continues to be developed as the successor product to the 8700 HMS customer base.

The 3700 POS, released in fiscal year 1997, is designed for table service restaurants. It has an open systems architecture as it operates under Microsoft’s Windows® 2000 operating system, utilizes either Microsoft’s SQL or Sybase’s relational databases, and runs on industry standard Intel®-based PCs. It utilizes a touchscreen, with the Microsoft Windows® based graphical user interface.

The 2700 HMS, released in fiscal year 1990, is a stand-alone intelligent touchscreen terminal designed for table service restaurants, both large and small. The 2700 HMS, available in both an entry level and premium-configured platform, relies on proprietary terminal architecture and interfaces with Microsoft’s DOS/Windows®, PC back office software systems.

MICROS introduced the Restaurant Enterprise Series (“RES”) software suite, now called “RES 3000”, in fiscal year 1999. RES is a software suite of products that encompasses point-of-sale transaction control, restaurant operations (labor scheduling, time and attendance and financial management), data analysis, and communications. The POS software comprises the front-end application for the 3700 system. The restaurant operations modules constitute the Enterprise Office suite. The software modules include inventory, product forecasting, labor management, financial management, and enterprise data management. These modules are designed to operate at a restaurant site. For management of multiple restaurants, the RES includes a suite of software products called Enterprise Management. This suite allows for data to be transmitted to a remote site (including a corporation’s headquarters) for data collection and analysis. Additionally, changes such as pricing and menus can be made at a remote site and downloaded to specified restaurant locations. The Restaurant Enterprise Series is an important component of MICROS’s strategy to fully integrate point-of-sale transaction processing with other restaurant operational and management functions.

In fiscal year 2001, MICROS entered into an alliance with Vivonet, Inc., a Vancouver, Canada based privately held software development company, pursuant to which MICROS secured exclusive distribution rights for the global hospitality industry to distribute Vivonet’s web-based POS system called iPOS. MICROS and Vivonet restructured this relationship in September 2003 as follows: (i) MICROS obtained an unlimited non-exclusive license to the source code; and (ii) MICROS will pay Vivonet a royalty on each license sold for a three year period, subject to certain conditions and exceptions. Development of the iPOS product will now be conducted in MICROS’s Columbia, Maryland headquarters. As part of the restructured arrangement, MICROS relinquished its minority ownership interest in Vivonet, which such investment was fully expensed in the fiscal fourth quarter of 2003.

In addition, MICROS developed and introduced an Internet based portal product called “mymicros.net” during fiscal year 2002. Mymicros.net posts store transaction POS detail to a centralized data warehouse in near real time. This allows the customer to view reports and charts for a single store, a group, or the entire enterprise from any location that has an Internet connection. The mymicros.net software product can either be purchased via a license to use or by an annual or multi-year subscription contract. In fiscal year 2003, MICROS created a data center in its Columbia, Maryland headquarters to host the mymicros.net software for customers.

MICROS markets the HSI POS product primarily to table service customers in North America via a direct sales force. The product contains a wide array of point of sales features. A portal called “myhsi.net” was introduced in fiscal year 2002. The product’s functionality is similar to the mymicros.net portal and is designed for the HSI POS product. MICROS plans on continuing the development of the HSI POS product, which serves effectively certain niches of the hospitality industry.

The Indatec product is marketed to smaller table service restaurants and small hotels with restaurants in Europe that do not require the higher-level functionality of MICROS POS products. These smaller restaurants require a lower cost product in terms of purchase and installation expense, a market niche that the Indatec product is designed to serve.

The Company’s design architecture allows existing users of many MICROS POS products to access new technologies and applications in conjunction with their existing MICROS POS system. In addition, many MICROS products interface with various back office accounting and property management systems, including the Company’s hotel PMS products.

Retail Information Systems.

Through its Datavantage subsidiary, MICROS markets store software automation systems and business intelligence applications. The store systems are called Store21 Store Management System (“Store21”) and Tradewind Store Management System (“Tradewind”). Store21 is designed for smaller retail operations, while Tradewind is targeted at larger heavy transaction oriented retail stores. The Proact Home Office Business Intelligence Suite (“Proact”) includes loss prevention, customer relationship management, gift cards and audit control. The products operate on Microsoft’s Windows® NT and 2000 operation systems and utilize Sybase® as the database. All of its systems run on industry standard PCs and specially designed PC-based POS terminals manufactured by IBM and NCR. MICROS is working with Datavantage to modify its software to run on MICROS Eclipse PCWS. This process is scheduled for completion in the second quarter of fiscal year 2004, and shall then be offered to customers as an alternative POS terminal option.
 

Services

MICROS provides a wide range of service products and support services to its customers. Products include spare parts, media supplies (ribbons, paper, printer cartridges, etc.), network products, printers, active power-line conditioners and uninterruptible power supplies. MICROS offers these supplies through its direct sales offices and through an operation called POS Depot (North America only). Services include installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, help desk, credit card software support, systems configuration, network support and consulting. MICROS offers software hosting capabilities which allows customers to utilize the software without investing in hardware and a network.

MICROS provides field hardware and software maintenance via a combination of its direct and indirect (authorized U.S. dealers and international distributors) channels. The field hardware maintenance is provided mainly to customers using MICROS POS hardware and software systems. MICROS may contract with various PC manufacturers to provide either first or second line support for PC servers for both hotel and restaurant customers. Maintenance contracts are an important and growing part of MICROS’s revenue.

MICROS operates a help desk seven days a week, 24 hours per day (7/24) in its Columbia, Maryland headquarters. This central support operation receives support calls from customers and addresses them on-line or dispatches a service call to the appropriate local service provider. Internationally, in-country support is provided by the local sales entity, whether it be a MICROS subsidiary or distributor. MICROS maintains regional support centers in Neuss, Germany, Galway, Ireland, Buenos Aires, Argentina and Sydney, Australia. MICROS’s corporate customer service provides back-up support for its regional centers. Customer support for myfidelio.net is centered in Hamburg, Germany, the site of the subsidiary’s product development operations. MICROS’s HSI division maintains a 7/24 call center in Scottsdale, Arizona to support its hotel and restaurant products. Datavantage supports its retail customers from its 7/24 help desk in its headquarter facility located in Cleveland, Ohio.

COMPETITION

The Company believes that its competitive strengths include its established global distribution and service network, its ability to offer a broad array of hardware, software and service products to the hospitality and retail industry and its corporate focus on providing specialized information systems solutions.

The markets in which the Company operates are highly competitive. MICROS competes on the basis of various factors, including product functionality, service capabilities, price and geography. There are at least 40 competitors worldwide that offer some form of sophisticated restaurant POS system similar to the Company’s over 100 hotel systems competitors and over 50 retail systems competitors. Competitors in the restaurant POS marketplace include full service providers such as Aloha, Infogenesis, NCR, Par Technology, Panasonic, POSitouch, Progressive, Radiant Systems, Sharp, Squirrel, Vectron AG, and hardware providers such as Dell, IBM, and NCR. There are also numerous companies that license their POS-oriented software with PC-based systems in regional markets around the world.

Many of the over 100 competitors in the hotel systems market are companies with software designed to run on industry standard PCs. These companies may have several hotel related software products, or simply one product for a particular niche. These competitors include Inter-American Data, MAI Systems, Multi-Systems, Newmarket, Optims, Pegasus, Ramesys, Springer-Miller, Visual One, and property management systems developed and marketed by major hotel chains for their corporate-owned operations and franchisees. Internationally, MICROS generally faces smaller, regionally oriented competitors.

The specialty retail market in which MICROS’s subsidiary Datavantage operates within is highly competitive. Competitors include CRS Retail Systems, JDA Software, NSB, Retek, and Triversity, among many others.

The CRS market is highly fragmented, with most central reservation systems being customized systems for each hotel chain or allied reservation group. The competitors in this market consist of in-house development efforts by chains, property management competitors such as Pegasus and Springer-Miller, and specialized central reservation providers such as Lexington Services, Unirez, VIP International Corp., and WizCom International/Trust International (subsidiaries of Cendant Corporation). The market for central reservation systems is highly competitive.

MICROS believes that the CIS market has various competitors. Those that offer such a product are generally smaller companies targeting specialized segments of the market. However, most of the systems in place today are customized solutions developed by specific chains for their own use. These customized systems are thus not marketed to other hotel chains.

ticker: MCRS
 

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