They had record operating earnings, and revenues were down only slightly over an extremely strong fourth quarter, and were the second highest in company history. Sales, while less than the fourth quarter, were better than 13% higher than for the third quarter, which was a record quarter in its own right (The company identifies the third and fourth quarters as traditionally their stronger quarters). I think a lot of the price pullback is related to two things. First, I think the market was looking at the fourth quarter's 24 cents, which is a big mistake. About seven cents of those earnings were for recovery of NOLs, and should not even be considered. As for the margins, the gross margin fell BARELY, from 76.0% to 74.7%. The cost of sales in the first quarter fell to 14.1% from 15%, and the cost of maintenance rose slightly to 43.9%, from 42.5% in the fourth quarter. Big deal. Income before taxes rose to 15.3% of revenues in the first quarter, from 14.6% in the fourth quarter. If the margins were truely lower, enough to drill the stock, than I am certainly missing it.
Keep in mind that CA (and I am sure others) got hurt in Europe as well in the first quarter. Also remember that we got the DISA contract RIGHT after the end of the first quarter. If that sale had come three weeks earlier, the quarter would have been considered a great one, and we would not be having this conversation.
Comparisons are normally made year over year, and on that basis New D really kicked butt. Operating earnings per share rose to 16 cents from 4 cents. Sales per share rose to 67 cents vs. 50 cents. Gross profit per share rose to 80 cents from 63 cents. Even maintenance fees (as expected) rose to 40 cents per share vs. 35 cents. What part of these numbers implies that we are sluggish? I am missing it.
Quarter over quarter is not necessarily a fair comparison for these guys, as they are in a somewhat seasonal business, plus they are a little small, so having one or two sales slide past an arbitrary date on the calendar can have a relatively larger impact on them than on IBM or CA. But look at the numbers over the last three quarters vs. the last three years. They are ramping up. With new products coming out, and with a review of output management software (I think that is it) by the Gartner Group about to come out that names them the company with easily the greatest "future vision", we are at the beginning of the company's surge. This report will name them the company with the highest future vision for the third time in a year, in three different major software categories. Let us not forget that the DISA contract, to support operations pertaining to our National security, has been awarded to New D. It was a three year study, and we won pretty big.
New D software at the DISA sites is actually replacing software by CA.
Anyway, I think that great things lie ahead, and that the market is not really looking at what is going on with the company. Eventually they will. |
