Estimates were .30--ranged from .28 to .30. Revenue growth a little weak, but increase in software revenues is extremely important. Comparable 1996 Q1 software revenues were $4.8 million vs. $10.8 million this quarter--that is 125% growth!!! Also, realize that for all of 1996, software revenues were only $23.8 million. This area is highly profitable and becoming a greater part of their business. This is key to their transition from a pure hardware producer to a software/hardware company. Other positives were rise in gross margins--company warned in 1996 that margins will be pressured until software takes off in second half--this is a nice surprise. Internet commerce sales were about $1 million--this is nice because most analyst models include zero internet revenues.
Negatives include the slow rvenue growth, but that was countered by strict cost control and share repurchases. The pace of growth in international sales slowed in Q1. Days sales outstanding increased, but moves are in place to drop that number rom 105 back down to the 80's.
All in all, I don't know what the market will think. I think the numbers are quite good considering the huge change going on within the company. The company is making a huge shift in business, but is able to keep up the excellent earnings and cash flow, while still increasing R&D at an abnormal rate. VFI was able to repurchase another 200,000 shares, bringing shares outstanding down to 23.3 million at quarter end, vs. over 26 million last year.
We shall see what the market thinks in the short term, but long-term, VFI will be profitable for all who hold on. |
