The Turnaround Continues at Magic Software

Published: August 27, 2007

by Timothy Prickett Morgan

Application development tool maker Magic Software continues to reap the benefits of the restructuring it underwent last year and a revamped product line. In its second quarter ended June 30, the Or Yehuda, Israel, software company reported sales of $16.8 million, up 11 percent from the year ago quarter, and better still, the company reported net income of $816,000, a swing into the black. In the second quarter of 2006, Magic Software lost $1.3 million.

Software sales in the second quarter came to $3.5 million, down 12 percent, while end user application sales came to $1.6 million, down 9 percent. Maintenance and support revenues for Magic Software came to just under $4.1 million, up 6 percent. Consultant fees and other services jumped by 37 percent to $7.66 million, saving the financial day. Having slashed costs, Magic Software was able to post an operating profit in excess of $1 million, and brought $816,000 of that to the bottom line. The company also exited the quarter with $12.3 million in cash and $4.6 million in short term investments.

Eitan Naor, who was hired to be the company's new president and chief executive officer, took the helm in July after the quarter closed. In late July, Magic Software hired David Zigdon as its chief financial officer, replacing Ziv Zviel, who was vice president of finance and operations. Zigdon has worked as CFO at a number of Israeli companies, some of them in the tech area; he begins his job at Magic Software on October 15. Magic has also hired Arita Mattsoff, an executive with extensive experience in selling software on a global basis, according to the company, as its new vice president of global marketing.

"During the second quarter, we began carrying out steps intended to reinforce our execution capabilities," said Naor in a statement accompanying the results. "We're currently turning the company's focus to sales execution and customer support, with an emphasis on improving existing customer relationships, expanding the sales pipeline and closing pending deals."

Magic Software also announced that it has appointed Naor to its board of directors, and that it has brought in another board member, too, and bear with me since this is a little complicated. Magic Software is actually owned by another company, called Formula Systems, which is itself comprised of three companies traded on the Nasdaq exchange--Formula Systems, Magic Software, and Sapiens, plus another one called Matrix that is only traded on the Tel Aviv Stock Exchange; the other three are traded on the TASE as well. Just to make it more complicated, Formula Systems was bought up by another Israeli company called Emblaze, which is traded on the London Stock Exchange as well as on the TASE. In any event, the new board member for Magic Software is Hadas Gazit Kaiser, chief financial officer of Magic Software's grandparent company.

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