Magic Software's Revenue and Profits Decline in Q2

Published: August 10, 2009

by Timothy Prickett Morgan

Application development tool and integration middleware provider Magic Software Enterprises has been able to wring some more profits out of its business even as the slowing economy makes it tough to do so. However, like so many other software companies these days, the profits are down from where they were a year ago despite plenty of belt tightening.

In the quarter ended June 30, Magic Software posted sales of $13.6 million, down 15.2 percent from last year's second quarter and down 1.3 percent from the first quarter, when it booked $13.8 million in sales worldwide. By cutting back on research and development as well as sales and marketing expenses, the company was able to bring $1.1 million to the bottom line, but that was 34.8 percent lower than the year ago quarter's profits. However, that Q2 profit was better than the $714,000 in net income that Magic Software had in the quarter ended in March, which means things are getting better.

Guy Bernstein, Chairman of Magic Software, commented on the results:

"While the outcome of the recession has affected our revenues, particularly in our Japanese and U.S. markets, we succeeded in compensating with improved operational efficiency and shortened sales cycle," said Guy Bernstein, Magic Software's chairman, in a statement accompanying the Q2 financial figures. "These measures have allowed us to present an increase in our profitability and cash balances. We are now starting to see signs of improvement in our U.S. business, and we believe that these will translate into additional sales in the near future."

Magic Software has $20.8 million in cash, $13.5 million in short-term bank deposits, and $2.6 million in marketable securities, so it is in pretty good shape asset-wise, and it doesn't have much debt at all, which is exactly where you want to be in a recession. Well, you want to be out of the recession if you are in it, I suppose.

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