Globe and Mail.......
With reactions like these, I am battening down for further turbulence. Looks like we will see single digits in the near future, which could turn out to be the true buying opportunity worth waiting for, assuming a turn around within 2 to 3 years. What irked me most about the earnings release were the half-hearted mumblings about possibility of spin-off, US listing, with nothing definite to hang your hat on. Don't talk about it -- DO IT, ALREADY!
Geac evolves into different animal
- Friday, July 14, 2000
Geac is not your average software company. In fact, it is becoming increasingly clear that it really isn't a software company at all. For most of the firms that sell bits of bytes, revenue growth from exploding product sales is the name of the game. Not so at Geac, where growth (excluding acquisitions) has been negligible. That was to have changed after the purchase of Dun & Bradstreet Corp.'s software unit in late 1996. Internal growth was to at least complement, and perhaps supplant, revenue gained through acquisitions. More than three years later, that strategy is officially dead: Geac now says that its strategy is to grow through purchases -- and revenue excluding acquisitions actually fell in the fourth quarter. The company itself denies it, but it is entirely clear that Geac is evolving into a holding company, with all the attendant disadvantages of that species.
*************************************************************************
Geac spirals to 43-month low
by Showwei Chu - Friday, July 14, 2000
Geac Computer Corp. Ltd. shares tumbled to a 43-month low yesterday after the software company reported disappointing earnings for the fourth quarter and warned that revenue and earnings will be lower in the next two quarters.
Markham, Ont.-based Geac also said it is selling its banking systems unit for $160-million to a European venture capital group in order to pay down debt.
The company said its earnings were hurt by weakness in its consultancy business, which accounts for one-third of revenue. Douglas Bergeron, Geac's chief executive officer, said the slowdown in its professional services business applies not only to Geac, but other major industry players as well, including Computer Associates International Inc., CGI Group Inc. and Electronic Data Systems Corp.
"It seems that corporate IT spending for non-Internet-related activities is in some sort of pause mode," Mr. Bergeron said. "It's due to focus . . . on e-commerce and the fact that infrastructure systems are fully functional and fully robust, so they're kind of turning over on their own without a lot of hand-holding from consultancy."
Geac shares fell 7.6 per cent or $1 to $12.25 in Toronto trading of 1.7 million shares yesterday.
The company earnings fell substantially short of analysts' estimates. Profit before charges was $30.8-million or 48 cents a share, compared with a loss of $69-million or $1.10 in the fourth quarter ended April 30. Geac was expected to earn 60 cents a share in the fourth quarter, based on the average estimate of four analysts surveyed by First Call Corp.
But the company lost $9.8-million or 16 cents a share once amortization charges related to acquisitions were included. In the fourth quarter, amortization charges for good will and acquired software were $40.7-million, up $31.5-million from the year-ago quarter.
For the year, analysts were expecting earnings of $2.50 a share, compared with $2.39.
Revenue rose 27.8 per cent to $265.4-million in the fourth quarter, up from $207.6-million in the same period a year earlier.
The company's two other sources of revenue are new software licences and so-called fixed maintenance, which is fees charged to clients for its software. Only its licencing business, which makes up 20 per cent of revenue, has marginally been affected, he said. But Mr. Bergeron said he expects overall revenue to "return to normal by autumn."
For fiscal 2000, Geac reported sales of $990.1-million, up from $783-million in the same period a year ago. Sales in fiscal 2000 included about $290-million for acquisitions, Geac said. The company's revenue, excluding acquisitions, shrunk by about $70-million, excluding the effects of foreign exchange.
To reduce debt, Geac said yesterday that it has agreed to sell its SmartStream Banking Systems business for about $160-million in cash -- about 3.2 times more than its annual revenue of about $50-million -- to a European venture capital group led by 3i Group PLC. Geac plans to pay down about $155-million in debt, Mr. Bergeron said.
That announcement left some analysts confused and disappointed about its business strategy. Paul Lechem, an analyst at CIBC World Markets Inc., said Geac is now under review. He previously rated the stock a "buy." |
