Business and investing: It\u2019s been a tough year for software-as-a-service providers globally as they continue to battle doubts about the continued viability of their business models in a world increasingly dominated by AI.<\/p>\n
Once considered market darlings with share prices to match, these days they are largely shunned by investors in their rush to embrace the possibilities of new age AI businesses unencumbered by legacy systems and processes.<\/p>\n
Take locally listed online travel booking and expense management service provider Serko as a case in point.<\/p>\n
Despite recently reporting a 34 percent lift in annual revenue, having no debt, a cash buffer of $54.1 million and a global business model that has fully embraced AI from the outset and is continuing to grow, its share price has almost halved since the start of the year closing on Friday at $1.32 \u2013 a six-year low.<\/p>\n
Or go back to October 2021 when its share price peaked above $8 and the decline five years on is even more dramatic.<\/p>\n
And it\u2019s not alone. In the US, Salesforce, the world\u2019s leading customer relationship management software provider has seen its share price sink 35 percent year-to-date, while locally based online accounting provider Xero, whose shares are listed on the ASX, fell to a six-year low of A$61.58 on Friday \u2013 down 45 percent year to date.<\/p>\n
Serko chief executive Darrin Grafton, who co-founded the business almost 20 years ago, admits the share price slide can be demoralising.<\/p>\n
\u201cIt is disappointing that the market doesn\u2019t see everything we\u2019ve done over the years and build a little bit of faith.\u201d<\/p>\n
But in a nutshell, that\u2019s the problem all software as a service businesses face: a lack of faith in the continued viability of their business models \u2013 despite the fact most of them are not necessarily easily replicated by AI.<\/p>\n
In 2006 when Grafton co-founded Serko it was built on a simple premise.<\/p>\n
\u201cI thought to myself, imagine if we could build a global company from New Zealand with an online platform that\u00a0spanned the world. I even had this moonshot goal that 20 percent of the world\u2019s business travellers would eventually be using our technology.<\/p>\n
\u201cToday we operate across 180 countries, employ 400+ staff in six countries and our strong relationship with the world\u2019s leading online accommodation website Booking.com continues to underpin the business.\u201d<\/p>\n
And far from being concerned about the impact of AI on the business, Grafton says the next decade is shaping up to be the most exciting decade in Serko\u2019s history.<\/p>\n
\u201cPeople regularly say to me \u2018don\u2019t you fear the impact AI is going to have on the business?\u2019 to which I respond \u2018no, technology is finally catching up with the possibility to really change business travel forever\u2019.\u201d<\/p>\n
But in a world reshaped by Covid is business travel still important?<\/p>\n
\u201cAbsolutely! And what\u2019s more, I\u2019m expecting it to keep growing,\u201d says Grafton.<\/p>\n
\u201cBut where the shift has occurred is to prioritise more important or essential travel. From in-person conference presentations through to engineers meeting up with colleagues for whiteboarding ideas, these are all situations that just don\u2019t happen virtually. And we see that all the time.<\/p>\n
\u201cIntuitively, it may seem the opposite. These days we operate in a full-scale digital economy. You\u2019ve seen a massive change in the internet, data speeds and all that and yet every single day, millions of people board planes for business commitments. And you ask yourself the question, \u2018Why?\u2019 And the answer is simple, we are wired to connect, and we are wired to have those conversations that happen only while you\u2019re in a room, in person.\u201d<\/p>\n
Although that\u2019s all valid, sceptics will argue that AI systems will be able to take care of booking and travel management independently and most likely at a lesser cost enabling existing customers to bypass intermediaries in the future.<\/p>\n
Unsurprisingly, Grafton disagrees pointing to several significant and not easily replicated advantages including decades of rich, proprietary travel data at scale, a deeply connected supply ecosystem, and an embedded technology platform that is already used by millions of travellers and thousands of organisations worldwide.<\/p>\n
Serko.ai, Serko\u2019s latest booking platform, is in closed-beta trial in the US and offers a taste of what managing future businesses will look like.<\/p>\n
Built on three key principles and incorporating multiple AI features, the new platform will be designed to reflect how people actually travel for work: intent driven, personalised by default and \u2018agentic\u2019 by design \u2013 not a chatbot layered on top of a booking tool, but a coordinated execution engine that takes action on the traveller\u2019s behalf.<\/p>\n
Miss your flight, and the platform will automatically rebook and reschedule everything for you in in instant, or decide to extend your stay and everything else is taken care of for you automatically.<\/p>\n
James Lindsay, head of research at Forsyth Barr Capital Markets, says what the market will be looking for from this point is for the business to show continued growth in bookings and customers.<\/p>\n
\u201cSerko achieved 4.3 million room nights for the year, which was up a reasonably impressive 31 percent, so if they continue to maintain that sort of growth trajectory that would be positive. A continued strengthening of its relationship with booking.com and the successful launch of its serko.ai platform next year would also be reassuring for investors.\u201d<\/p>\n
Lindsay also points favourably to Serko\u2019s long-term growth aspirations.<\/p>\n
\u201cSerko does have a $250m revenue aspiration and currently it\u2019s total income is well below that, but I do give them credit for having a big, longer-term goal like that. If they continue to affirm that target and show progress towards achieving it, that would certainly be positive for investors.\u201d<\/p>\n
Disclosure: The author has a small shareholding in Serko<\/p>\n
Investors brace for a volatile week ahead of US Federal Reserve meeting<\/p>\n
As if investors didn\u2019t already have enough to contend with, last week they faced multiple curve balls including a renewed oil price shock, rising bond yields, new US trade wars, and the potential that the Federal Reserve will hike interest rates this week.<\/p>\n
Brent crude broke above US$100 a barrel for the first time in two months as the Middle East conflict spread from the Strait of Hormuz to the Red Sea. US President Donald Trump rebuilt part of his fallen tariff wall, reimposing duties of between 10-12.5 percent on imports from about 60 economies, including New Zealand, which US trade representative Jamieson Greer claimed\u00a0were designed to combat imports made with forced labour, an assertion Trade Minister Todd McClay strongly rejected.<\/p>\n
Long-dated US Treasury yields continued to climb with the closely watched US 10-year yield spiking above 4.7 percent \u2013 an 18-month high \u2013 as investors bet the Federal Reserve will be forced to hike rates early.<\/p>\n
Locally, the New Zealand 10-year Government bond yield has climbed 43 points over the past few weeks to a two-month high of 4.82 percent.<\/p>\n
In the US Big Tech stocks tumbled after Alphabet Inc raised its artificial-intelligence spending plans, reviving questions about whether the industry\u2019s enormous capital outlays will ultimately pay off.<\/p>\n
Pie Funds founder and chief investment officer Mike Taylor says that though there\u2019s a possibility of an early hike by the Fed this week, market repricing has largely already happened.<\/p>\n
\u201cSince late February the expected path of the Fed funds rate has moved up about 125 points as cuts were priced out and hikes priced in. Futures now have a hike as more or less a done deal by September, with odds around one-in-three for an early hike this week.<\/p>\n
\u201cWhat\u2019s interesting is that almost all of the rise in bond yields this year has been real rates, not inflation expectations. Breakeven rates \u2013 which measure market-implied inflation expectations \u2013 are still sitting under 2.3 percent even with crude oil almost at triple digits, which tells you the bond market thinks the Fed will do whatever it takes.\u201d<\/p>\n
If anything, Taylor says he\u2019s inclined to consider the opposite: that the US market has priced in too much tightening rather than too little.<\/p>\n
\u201cThe bigger issue is communication. If Fed chair Kevin Warsh does move, he needs to be very clear about the end game, because the risk isn\u2019t one hike, it\u2019s the market extrapolating to three or even four.\u201d<\/p>\n
Taylor points out that a hike this week is only about 30 percent priced in, so expect a knee-jerk sell-off if the Fed does deliver a surprise hike, and probably a high-correlation one where everything falls together rather than a rotation.<\/p>\n
\u201cThe vulnerable spots are obvious, long-duration tech and anything rate-sensitive. The Mag7 have already had their worst day since April 2025 on nothing more than the risk of higher rates. You\u2019d also likely see the dollar stronger and more pressure on the Japanese yen, which is already at its weakest since 1986.<\/p>\n
\u201cThat said, if a hike came with a clear message that this is a small adjustment rather than the start of a cycle, bonds could actually settle down, and that would put a floor under equities reasonably quickly. The reaction to the press conference will likely matter more than the decision itself.\u201d<\/p>\n
As for the rebound in the oil price, Taylor is concerned this latest price spike could be much more problematic than earlier in the year.<\/p>\n
\u201cThis rebound certainly has more teeth. The earlier episode faded because supply kept flowing. This time the Strait of Hormuz situation has re-escalated, Brent is trading at almost US$100, and prediction markets have gone from treating it as a contained flare-up to pricing much more sizeable impacts.\u201d<\/p>\n
Even so, Taylor says two things keep him from getting too bearish.<\/p>\n
\u201cFirst, the futures curve is still in steep backwardation, with oil priced below US$80 by December, so the market sees a spike, not a new floor. Second, the analysis I\u2019ve seen suggests oil would need to head towards US$200 before it becomes a major threat to the global economy. The real problem with oil at these levels isn\u2019t demand destruction, it\u2019s that it forces the Fed\u2019s hand. Oil is up over 40 percent YTD, and that\u2019s exactly what\u2019s driving the hike debate.\u201d<\/p>\n
Australia to appeal imposition of new US tariff<\/p>\n
Australian Prime Minister\u00a0Anthony Albanese\u00a0said he would appeal directly to US President\u00a0Donald Trump\u00a0over new tariffs announced by Washington, describing the levies as \u201cunjustified\u201d.<\/p>\n
Albanese said he would \u201cabsolutely\u201d raise the topic with Trump directly, when asked during an interview over the weekend, according to Bloomberg<\/p>\n
The Trump administration announced the new\u00a012.5 percent levy\u00a0last week after what it described as an investigation into alleged failures of some 60 economies, including New Zealand, to prevent forced labour in supply chains that affect American workers.<\/p>\n
Australia had already begun to engage with the US over the topic and would \u201craise it at every level of the Australia-US relationship\u201d, Albanese said.<\/p>\n
\u201cThese are unjustified. We have very strong provisions on modern slavery,\u201d he said. \u201cTariffs are a penalty on consumers in the country that imposes them. This will lead to higher costs in the United States and undermine the trading relationship that we have with our US friends.\u201d<\/p>\n
Albanese also called for an end to the Iran war, which has led to higher energy prices and questions over fuel supply in Australia saying the government would be making an announcement on fuel in the coming days or weeks, without providing further details.<\/p>\n
New Zealand, however, looks to take a more low-key position on the new tariff announcement \u2013 at least for now.<\/p>\n
Unlike in August last year when Trade Minister Todd McClay flew to Washington DC to make New Zealand\u2019s position clear face-to-face, this time around McClay told RNZ last week that a repeat visit was unlikely, and said he had already spoken to US trade officials to reiterate New Zealand\u2019s position.<\/p>\n
\u201cI very clearly explained there isn\u2019t forced labour in this country and that we have robust rules and laws in place, and that we take our obligations in this regard very, very seriously. But ultimately there was a bit of a shrug of the shoulders. The President of America is going to do what the President is going to do,\u201d McClay said.<\/p>\n
Coming up this week<\/p>\n
Monday<\/p>\n
Goodman Property Group AGM<\/p>\n
New residential mortgage lending by purpose (Jun) \u2013 Reserve Bank<\/p>\n
Tuesday<\/p>\n
Ryman Healthcare AGM<\/p>\n
Employment indicators (Jun) \u2013 Stats NZ<\/p>\n
Household living-costs price indexes (Jun qtr) \u2013 Stats NZ<\/p>\n
Wednesday<\/p>\n
Taiko Critical Minerals AGM<\/p>\n
Thursday<\/p>\n
Oceania Healthcare AGM<\/p>\n
Mainfreight AGM<\/p>\n
ANZ Business Outlook<\/p>\n
Friday<\/p>\n
AFT Pharmaceuticals AGM<\/p>\n
ANZ Roy Morgan Consumer Confidence<\/p>\n
Correction: Serko\u2019s cash buffer has been corrected to $54.1m.<\/p>\n","protected":false},"excerpt":{"rendered":"Business and investing: It\u2019s been a tough year for software-as-a-service providers globally as they continue to battle doubts…\n","protected":false},"author":2,"featured_media":553447,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,111,139,69,145],"class_list":["post-553446","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-new-zealand","tag-newzealand","tag-nz","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/553446","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=553446"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/553446\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/553447"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=553446"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=553446"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=553446"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}