Lawson Profits on Booming Software Sales Despite U.S. Weakness

Published: October 11, 2007

by Timothy Prickett Morgan

Midrange ERP software maker Lawson Software has finished up its first quarter of fiscal 2008, and has once again managed to pull down some profits despite what it calls some temporary weakness in the North American market. Lawson's sales in the quarter, which ended on August 31, rose by 16 percent to $187.4 million, with sales up in the three major geographic regions--Americas, EMEA, and Asia/Pacific--where Lawson does business.

In the quarter, Lawson's software license fee sales rose by a remarkable 52 percent to $25.5 million. This is remarkable mainly because thanks to the acquisition of Intentia International, one of the big suppliers of ERP software in Europe, Lawson has significantly expanded its market but great swaths of Europe go on holiday in the summer and companies do not typically buy software. Lawson's maintenance sales in the quarter were up by 13 percent to $78.5 million, and consulting sales were up 11 percent to $83.4 million. Lawson's net income in the quarter came to $5.6 million--the company's second quarter of being in the black since the Intentia acquisition was closed a year ago--compared to a $15.8 million loss in the first quarter of fiscal 2007. By the way, Lawson copped to the fact that the weak U.S. dollar contributed to 3 percent out of the 16 percent growth it had in the quarter. Sales in the America's region accounted for 55 percent of total sales, or $103 million, while EMEA accounted for $76.8 million; Asia/Pacific, while growing, only represented 4 percent of Lawson's sales in the quarter, or $7.5 million.

Harry Debes, Lawson's president and chief executive officer, downplayed the softness in the North American region. "I believe that weakness that we had, in the U.S. in particular, is temporary," said Debes. "It was, I believe, a combination of a big fourth quarter and perhaps some execution issues. However, I have no reservation about telling you that it's temporary."

Looking ahead, Lawson expects sales in the second quarter of fiscal 2008 ended November 30 will be in the range of $200 million to $205 million, which is driven by an expected 20 percent to 30 percent growth in software license fees in the quarter. Lawson expects to bring between 2 cents and 4 cents per share to the bottom line, and ended the quarter with $483.1 million in cash and equivalents in the bank. Lawson has more or less hit its financial targets for the past year, and its stock price has risen by 25 percent since the beginning of 2007. But last week, there was a bit of profit taking, and Lawson's stock fell a bit. The trend has been steady and upward since Lawson hit its 52-week low on January 9 of $6.60 a share; the company has a market capitalization of $1.8 billion today, up 53 percent since that low.

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