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Advent Software: The 17-Year Overnight Success Story

In the early 1980s, when Stephanie DiMarco was working as a portfolio manager at Bank of America, she saw many opportunities to make an analyst's job much easier. So in 1983, she started Advent Software , which is now the leading software developer for the investment management community.

The product line is quite extensive. Axys and Geneva allow for advanced portfolio management. The Advent Partner product helps with complex tax layering and partnership accounting. Moxy is geared for trading and order management. Then there is Qube, which is an enterprise-wide client relationship management system. Advent Browser Reporter helps distribute reports over the Web and Rex allows for Web-based reconciliation.

During the past quarter, revenues were $34.1 million, which was up from $27 million in the same period a year ago. Although, net income surged 42% to $7.1 million. Then again, the company was able to boost operating margins from 23.6% to 26.2%.

Of course, the Internet will be a driving force for Advent. For example, the company plans to launch the ambitious Advent TrustedNetwork. In essence, the product allows financial institutions to get cross-institutional, consolidated views of client portfolios - straight from the Net. After all, most investors maintain multiple accounts, which may include brokerage accounts, IRAs, 401(k)s, bank accounts and so on. Thus, with TrustedNetwork, financial advisors can give much better advice -- as a client's complete financial status will be in plain view. In a way, the TrustedNetwork will be a critical piece of infrastructure for financial institutions.

But there are definite risks with Advent. First of all, the company does have a premium valuation. Currently, the PE ratio is 91 and the market cap is $1.9 billion.

Also, the financial services industry is subject to tremendous volatility. But, ironically enough, this may be a benefit for Advent. How? The hyper-fast growth of assets under management is slowing for financial institutions. In other words, there will be demand for tools to reduce costs. In fact, there was a clear hint of this from Janus Capital this week. According to an internal memo, the company is taking steps to use the Internet to reduce its cost structures, as the firm expects top-line growth to flatten.

Actually, expect more announcements like this -- and, most likely, more business for Advent.