Lawson Back in the Black as Fiscal 2007 Closes

Published: August 2, 2007

by Timothy Prickett Morgan

ERP software maker Lawson Software celebrated the one-year anniversary of its acquisition of sometime rival Intentia International by getting back into the black during its fourth quarter of fiscal 2007, which ended on May 31. For the quarter, Lawson booked sales of $212.9 million, up 69 percent mostly because of the addition of Intentia. More importantly, as far as Lawson shareholders are concerned, Lawson had a net income of $8.1 million in the quarter, a lot better than the $4.8 million loss it had a year ago.

During the quarter, software license fees rose by 111 percent to $40.6 million, while maintenance fees rose by 43 percent to $77.8 million. Consulting fees came to $94.4 million, up 81 percent.

For the full fiscal year, Lawson's sales rose by 92 percent to $750.4 million. Software license fees were up 40 percent to $105.9 million, with maintenance fees up 55 percent to $291.7 million and consulting fees up 168 percent to $352.9 million. For the full year, Lawson booked an operating loss of $18.6 million, driven by restructuring costs and amortization of acquired intangibles in the wake of the Intentia acquisition; the company had a net loss of $20.9 million for fiscal 2007.

It is hard to say with much precision how much of the growth in Lawson's sales in the quarter had to do with Intentia, since companies are not required by law to merge the data for the two companies to do fair comparisons. When Hewlett-Packard ate Compaq, it provided such numbers, so you could see the real growth and declines for the first four quarters after the deal was done, and when IT companies spin off operations, they often show results from continuing operations as well as from total operations, including numbers for discontinued operations.

Lawson did give a little bit of guidance after showing old and new numbers. In the fourth quarter, Lawson said that about 75 percent of the increase in sales was driven by pulling in a full quarter of Intentia's sales, compared to only five weeks in fiscal 2006's fourth quarter. The company said that higher sales of legacy Lawson products accounts for 25 percent of the increase in sales. The company said that it did 450 deals for its Lawson System Foundation 9, the flagship Lawson product, in the fourth quarter. Across all of its software lines, Lawson did 751 deals with an average selling price of $57,000, compared to 354 deals a year ago with an average selling price of $88,000.

For the full year, Lawson's legacy software license fee sales actually dropped by 3 percent, which the company said was explained by lower revenue recognition rates in certain contracts. The absorption of Intentia accounted for 79 percent of the company's revenue growth for the year, with the remainder coming from organic growth in Lawson's consulting and maintenance businesses and absorbing the hit on software licensing fees for legacy Lawson products earlier in fiscal 2007.

"Our fourth quarter financial results are another indication that our strategy is sound and that our execution continues to improve." said Harry Debes, Lawson's president and chief executive officer in a statement accompanying the financial results. "Because of the Lawson-Intentia combination in April 2006, fiscal 2007 was a year of significant transition in our company. During the last 12 months we have organically grown revenue in total and improved bottom line performance in every quarter. We have created and delivered a comprehensive product strategy, built an energized team of leaders, sales account executives and employees around the world, built a 500-person facility in Manila and strengthened and streamlined global operations. I am proud of our progress in 2007, and on this solid foundation, I am confident about what we can achieve in the future."

Looking ahead to the first quarter of fiscal 2008, ending August 31, Lawson is doing something that very few public IT companies do these days--providing precise guidance. Lawson said it expected software license sales of between $24 million and $27 million in Q1, with maintenance revenues of $78 million to $79 million and consulting revenues between $80 million and $82 million. Adding it up, that puts total sales in the first quarter at between $183 million and $188 million. The company said further that it expected earnings in the range of 1 cent to 3 cents per share. For the full fiscal 2008, Lawson is projecting sales of between $820 million and $830 million, with earnings falling in a range of 17 cents to 22 cents per share.

Lawson is sitting on $553.8 million in cash and has $263.4 million in deferred revenues in the quarter, mostly from maintenance contract renewals.

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