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  • Lawson Sales Hit by Economic Downturn in Fiscal Q2

    January 12, 2009 Timothy Prickett Morgan

    Midrange ERP software maker Lawson Software reported its financial results for the second quarter of its fiscal 2009, and like many other companies in the IT sector, the quarter saw sales dampen thanks to the global economic turmoil.

    For the quarter ended November 30, Lawson said that its overall sales fell by 5.6 percent to $206.3 million. Software license fees, a barometer of sorts for economic activity, fell by 8.9 percent to just over $30 million, while maintenance fees rose by 6.3 percent to $90.1 million. Consulting revenues, another economic indicator (but probably not as good as license sales in determining current activity), fell much more dramatically in the quarter, down 14.6 percent to $86.2 million. Lawson cut back on sales, administrative, marketing, and other costs in the quarter, and was therefore able to boost net income by 13 percent to $4.2 million, or 3 cents a share. But the fact that net income represented only 2 percent of revenues shows you just how skinny margins have been in the software racket for many years unless you have a tidy little monopoly like Microsoft.

    Back in November as fiscal Q2 was winding down, Lawson cut approximately 200 jobs, or 5 percent of its 4,000-strong workforce, with the bulk of the job hits in the United States, we estimate. The layoffs were expected to be finished by December 31, so the charges and savings are not in the fiscal Q2 numbers. Lawson also said that it had instituted a hiring freeze, and given its normal attrition rate of employees through retirement and other causes, it would reduce its workforce in the current fiscal year by between 8 and 10 percent. Of course, there is no such thing as a normal attrition rate during a recession; people hang onto their jobs for dear economic life. Anyway, Lawson expects the workforce reduction to cut somewhere between $40 million and $50 million in costs from its books.

    Looking ahead to fiscal Q3, Lawson said last week that it expected sales of between $183 million and $187 million, which will be a decline of between 12.2 percent and 14 percent from fiscal 2008’s third quarter. Lawson is projecting that it will bring somewhere between 3 cents and 6 cents per share to the bottom line, which is a big improvement over the 1 penny per share it had in Q3 of fiscal 2008, which was itself an improvement over the 5 cents per share loss in fiscal 2007 for the same quarter. Looking further ahead, Lawson said that not only was it not updating guidance for the full fiscal 2009 year ending in May, but that Wall Street should not rely on that guidance as being valid any more.

    Lawson ended the quarter with $312.7 million in cash and equivalents, down from $363.8 million at the end of fiscal Q1 in August. The company had $197.5 million in deferred revenues as fiscal Q2 ended, down significantly from $275.1 million in the August quarter. Lawson had 256 deals in the quarter, down from 331 in fiscal 2008’s Q2; only 16 of these deals were to new customers, compared to 37 a year earlier. Average selling prices on the new deals came to $292,000, which is a lot lower than the $373,000 average a year ago. All of these declines show you how tough the economy is out there. But again, we all have to remember: an economy never goes to zero, although it might feel like it has.

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    Tags: Tags: mtfh_rc, Volume 18, Number 2 -- January 12, 2009

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TFH Volume: 18 Issue: 2

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    Table of Contents

    • There’s No i in Barack Obama, But There Is One in Bailout
    • Layoff Rumors Panic IBM Workers; Nothing Confirmed
    • Application Modernization: Money in the Bank
    • Mad Dog 21/21: Shoes for Cheeses
    • IT Jobs 2009: The Dot-Com Bubble Burst Was ‘A Cake Walk’
    • Jack Kuehler, Former IBM President and Vice Chairman, Dies at 76
    • VAI Nets U.K.-Based Kingfisher for Reseller Partnership
    • Lawson Sales Hit by Economic Downturn in Fiscal Q2
    • Infinite Software Buys Another HP Reseller
    • The Internet: Beyond the Wild, Wild West; Think Stone Age

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