Seagull Software Shows Growth in First Half of Fiscal 2007

Published: November 27, 2006

by Timothy Prickett Morgan

Seagull Software, the Dutch supplier of development tools and middleware for the OS/400 and i5/OS platform, reported its financial results for the first half of fiscal 2007 ended October 31. While sales increased significantly in the period, expenses pushed down operating and net profits.

Seagull says that for the half-year period, it booked sales of $15.7 million, up 16 percent from the first half of fiscal 2006. Software license sales rose to $6.8 million, up 15 percent from the $5.9 million level from a year ago, while maintenance and other services sales were $9 million, up 17 percent from $7.7 million a year ago.

That growth would be wonderful, except that it came at a short-term cost on profits. Seagull's operating expenses were $13.2 million, up 19 percent from a year ago, mainly because of an increase in Seagull's sales force and a boost in its marketing, research, development, and general expenses. During the first half of fiscal 2007, the company's operating profit shrank to a mere $7,000 (down from $381,000 in the year-ago half), and then when $740,000 in depreciation and amortization expenses and $276,000 in stock option expenses were added in, Seagull was pushed to a net loss of $1.1 million, compared to a meager profit of $101,000 in the first six months of fiscal 2006. That worked out to a net loss of 12 cents per share, compared to a net gain of 1 cent per share a year ago.

Don Addington, Seagull's president and chief executive officer, kept focused on the growth. "We are pleased to report that the pace of growth from last year continues into this year with a 16 percent increase in top line revenues, in combination with continued positive operating results," Addington said in a statement accompanying the results. "During the first half of this year we closed business with some notable new enterprise customers, and also expanded our footprint in several strategic accounts that we have been working with for over a year."

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