Activist Investor Icahn Puts the Squeeze on Lawson Software
June 14, 2010 Timothy Prickett Morgan
It takes money to make money, so they say, and if you have enough money, you can apparently make people let you take their money or their company. That, in essence, is what grumpy
Maybe markets need such motivation to be efficient, but I think lots of times, companies are just trying to conduct business in an adverse environment and activist investors with the kind of money and clout that Icahn has had for decades do as much damage to the economy as they do good. It is funny how they always get rich, and employees usually get fired. I’ve said it before and I will say it again: don’t ever take your company public if you love it.
If you can suss out the cluster of companies that Icahn has brought to bear to get his 8.54 percent stake in Lawson, which are detailed in the Schedule 13D filing that Lawson filed on May 21 (but no one noticed until last week), you have a lot more patience than I do. The minute I see “Cayman Islands” as a corporate address, my blood starts to run hot. As best I can figure, the companies controlled by Icahn has bought 13.8 million Lawson shares, for about $85.3 million, and from margin accounts that appear to be underwater to the tune of $686.4 million. The companies controlled by Icahn started scarfing up shares on April 1 and stopped on May 21.
Then it was perhaps no coincidence that Lawson reaffirmed its guidance for its fourth quarter of fiscal 2010 ended in May, saying on May 27 that revenues would be in the range of $194 million to $198 million and non-GAAP earnings per share in the range of 10 to 12 cents. Lawson then added that it would be booking a charge of between $5 million and $7 million, most of it hitting in the quarter ending in May but some spilling over into the first quarter of fiscal 2011 ending in August, to cover layoffs relating to the M3 product line. (Formerly known as Movex and the RPG suite that Intentia International, which Lawson bought a few years back, famously ported to Java on the AS/400.) Lawson did not elaborate on the restructuring, except to say that the M3 restructuring involved operations in the United States, Europe, and the Philippines. The layoffs will hit profits in the fourth quarter, Lawson said, adding that 150 to 200 people would be removed from its payroll to cut costs, which represents under 5 percent of its workforce. Lawson said that it would continue to invest in adapting its S3 and M3 suites for various industry verticals, and in the coming fiscal 2011 year would add roughly the same number of employees back.
I wonder what Carl Icahn thinks about all this. I have a feeling we will all find out soon enough. For the moment, Icahn is looking to meet with Lawson’s management. Lawson’s shared have been rising pretty steadily in the past year and are nearly triple from the low they set at the bottom of the Great Recession, when they kissed $3 a share. All things considered, Lawson did as well as anyone else in the downturn, and better than many. It may simply be that given this knowledge, Icahn wants Lawson to gussy itself up to sell to Oracle, SAP, Infor, or some private equity firm that is hot to trot to take a software company private and flip it later for an even higher price.
What any of this has to do with making good software that helps people run their business is beyond me. But I am old-fashioned that way. I run a business to work hard, employ people, and put out good products that don’t make me rich, but give me purpose, dignity, and fulfillment. I would bet his last dollar that Icahn would say something very similar about himself.