Magic Software Announces Global Restructuring Plan

Published: October 30, 2006

by Timothy Prickett Morgan

Application development and integration software maker Magic Software announced last week that it is working on a plan to restructure its business.

Magic Software is traded on both the Tel Aviv and Nasdaq stock markets, and after it made the announcement last Wednesday, the company's stock price rose by 10 percent. The company's sales have been down slightly in the first half of 2006, and costs have pushed it into the red ink. Sales for the first half of 2006 came to $30.4 million at Magic Software, but the company also booked a $1.5 million loss.

"Magic regularly examines its business goals and changing market trends in order to improve the service it provides its customers and enhance its competitiveness in the market, while, at the same time, increasing profitability and lowering costs," explained David Assia, the company's chairman and chief executive officer. "In addition, the company is taking the required steps to align its expenses and revenues in the different regions in which we operate globally. In order to bring us back to operational profitability within a short period of time, we have decided to begin the necessary restructuring process in which we will merge functions, increase efficiency, and reduce our headcount. We will continue to concentrate on our state-of-the-art flagship eDeveloper application development and iBolt application integration products to ensure growth in these markets."

According to a report last week in Globes, the daily business newspaper published in Israel, Magic Software has cut 10 percent of its 550-employee workforce as part of the restructuring.

Magic Software said that the revamped eDeveloper product is being well received by customers, and that the number of users of its iBolt integration tool was on the rise. Magic Software also said in the statement accompanying the restructuring announcement that it was building out its channel for the iBolt product. The company added that the changes it made would return the company to profitability in the beginning of 2007.

In July, when Magic Software said that it had OEMed IBM's DB2 Express database for use in conjunction with eDeveloper, the company's stock got a big bump up. But in late August, the 3 percent decline in sales to $15.2 million and the $1.3 million loss it booked meant that Magic Software would have to do something to get costs in line with sales.

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