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Volume 19, Number 21 -- June 7, 2010

Revenues and Profits Down at BluePhoenix in Q1

Published: June 7, 2010

by Timothy Prickett Morgan

BluePhoenix Solutions, which sells a variety of legacy application modernization products for IBM midrange and mainframe platforms, was feeling a bit of a crunch in the first quarter ended in March. Business has been tough for BluePhoenix since the Great Recession started in early 2008.

In Q1, BluePhoenix reported revenues of $17.4 million, down 15.4 percent. Operating losses tripled to just under $2 million and the company booked a net loss of $2.2 million, larger than the $1.8 million loss in the year-ago quarter.

"While we are disappointed with the financial results of the first quarter, we have started implementing a plan that will lead us to sustainable profitable growth," said Arik Kilman, chief executive officer of the publicly traded BluePhoenix. That plan includes selling off non-core and less profitable consulting businesses and focusing on sales of higher-margin legacy modernization tools and services. Kilman said that BluePhoenix would zero in on cash flow from operations, tightening its belt to control expenses and improving its contractual terms. Kilman also wants to work with key technology and system integration partners to boost its sales and backlog.

The Great Recession has not been easy on BluePhoenix, which was focused on mainframe legacy application modernization until it bought ASNA in August 2007, just ahead of the start of the recession. For the full 2007 year, BluePhoenix had revenues of 81.2 million and booked a net loss of $543,000. In 2008, revenues rose by 13 percent to $91.7 million, but BluePhoenix posted a $19.9 million loss. And last year, when the recession was hitting just about every IT company hard, BluePhoenix stomached a 15.2 percent revenue decline, to $77.8 million, and booked a $15.3 million loss.

The company's shares were trading near their year lows last week in the wake of the Q1 results, giving BluePhoenix a market capitalization of only $32.7 million as The Four Hundred went to press. BluePhoenix paid $9.5 million for ASNA nearly three years ago, and had 11 straight quarters of sequential growth before the recession hit.


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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik, Brian Kelly, Shannon O'Donnell,
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The Four Hundred

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