Public IBM i Software Companies Enjoyed Good Returns in 2010
Published: January 24, 2011
by Alex Woodie
What tech bubble? So IBM is trading at $150 per share, and Groupon is pondering a $15 billion IPO this year. Those certainly represent hefty valuation discounts in somebody's mind. Whether it's a bubble or a return to economic normalcy, the last year has been good for tech stocks, as reflected in a 20 percent rise in the NASDAQ Composite. Here's a quick roundup of public IBM i software vendors that did better than that, and others that dragged down the curve.
Magic Software: This NASDAQ stock has been on fire recently. The Israeli-based company, which creates development and integration tools that work on IBM i and other platforms, has enjoyed a 340 percent boost in its stock value over the last year. The confidence grew out of the vendor's stellar numbers for the third-quarter ended September 30. Get a load of these figures: revenue up 66 percent to $22.4 million, net income up 177 percent to $2.5 million. It will be interesting to see if the magic continues next week, when Magic Software reports fourth quarter figures.
MKS: The application lifecycle management (ALM) software company is trading near its 52-week high following the posting of solid financial results in 2010. In November, at the end of its first quarter, MKS, whose stock is traded on NASDAQ, unexpectedly posted a 42 percent jump in license revenue. In response, it boosted its dividend for the second straight quarter, which propelled the stock upwards to the $17 level, a 78 percent increase over 52 weeks.
Lawson Software: The ERP and HR software vendor's stock has enjoyed a resurgence in recent months as software sales increased due to the economic rebound. Lawson Software has delivered improved profitability in each of the last four quarters, with a 29 percent increase in net income for its second quarter ended November 30. In response, its stock, which is traded on the NASDAQ, has increased 43 percent over the last year.
Jack Henry: It's tough to find as consistent a performer as JKHY. Every year since 2004, Jack Henry & Associates has raised its dividend. It was bumped up from 4 cents per share in 2004 to 10 cents last year (look for an increase to 11 cents per share 2011). Over the last 12 months the stock is up 33 percent, and is closing in on its all-time high of $31.50 reached in July 2001, when its revenues were about $345 million per year. Today, Jack Henry is an $837 million company, and while its core banking system for retail banks and credit unions, including Silverlake, continue to run on the IBM i, the company has successfully diversified its portfolio with numerous acquisitions over the years. Expect another solid performance report next week, when Jack Henry (traded on the NASDAQ) reports its second quarter results.
Manhattan Associates: The Atlanta, Georgia-based developer of warehouse and supply chain management software for IBM i and other platforms has been a consistent performer over the years. Without any major hiccups and steady improvements from the depths of the Great Recession, MANH, which is traded on NASDAQ, has ridden the rising tide to a 32 percent gain over the last year, and is near a seven-year high of $31 per share, but still well off its all time high of $68 set in 2000. Manhattan Associates posts its fourth quarter results next Monday.
Fiserv: This developer of banking software for IBM i and other platforms has been a consistent performer over the last several years. The $4 billion company has increased profits in each of the last five quarters. Its stock, which is traded on the NASDAQ, reached an all-time high of $62.50 this month, and is up by 32 percent over the last 12 months. Fiserv reports its fourth quarter results next week.
JDA: The supply chain software vendor has come on strong in the last three months, as it seeks to move past the $246 million settlement from a lawsuit involving i2, which it bought in early 2010 for $396 million. JDA reported a big second-quarter loss in connection with that settlement, and also reported a 38 percent jump in new software sales during that quarter, which fueled record overall revenues. The pace of growth slowed just a tad in third quarter, but overall profitability improved. The company, which is due to report its latest financial results in one week, has enjoyed a 30 percent lift in its per-share price since the big settlement was disclosed.
FIS: Fidelity National Information Systems, which develops two IBM i packages used by banks, has grown into a $7 billion behemoth thanks to acquisitions, including several in the last year. Its profitability, however, has not kept up with revenue growth, and slipped from $560 million in net income in fiscal 2007 to $106 million in fiscal 2009, when it had $3.8 billion in sales. Nevertheless, its stock, which is traded on the NYSE, has enjoyed a 24 percent jump over the last year. The company reports fourth quarter results in two weeks.
Retalix: The Israeli-based provider of IBM i-based retail management software has improved its results since the financial doldrums of 2008, when Retalix recorded a net loss of $60 million. While revenue dropped 13 percent in fiscal 2009 to $192 million, it posted a respectable $5.8 million in net income for the year. Overall, its stock, which is traded on the NASDAQ, is up 9 percent over the last year; since the blow-out of late 2008, it's up about 300 percent. The company is expected to reports its fiscal 2010 results in March.
DST Systems: Kansas City, Missouri-based DST Systems, which provides record keeping services for companies in the financial services, healthcare, and communications industries has been an overall consistent performer over the years. Revenue for the past four years has consistently been in the $2.2 to $2.3 billion range, while net income has been in the $230 to $240 million range (except for fiscal 2007, when it sold almost $1 billion in assets). The company, which runs large IBM i and mainframe data centers, has not benefited from the overall increase in IT valuations, as its stock, which is traded on the NYSE, is up less than 2 percent over the last year, and is about half the value of its 2007 high. DST reports results on February 7.
Agilysys: AGYS, which develops software for the hospitality and retail sectors, is down nearly 40 percent over the last 52 weeks as the software vendor looks to find its footing in the new economic reality. Agilysys' stock took a dive in May when it announced revenue for the fourth quarter of fiscal 2010 (ended March 31) would be lower than expected. Thanks to a tough first quarter that saw a $10.5 million loss on $132 million in revenue, the stock has not partaken of the overall rise that has buoyed many public companies. With the Guest360 product finally out, it looks like revenues will increase for Agilysys, and next Tuesday we'll find out if CEO Martin Ellis' cost-cutting can put the company back on track, or whether Agilysys will be acquisition fodder.
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