Thread -- I'm surprised that the discussion here hasn't focused on M&A. Seems like SYSF management is actively courting that strategy.
Got this online from Boston Business Journal
Analysts spar over sagging SystemSoft
NATICK--Following nearly two years of losses that have reduced their company's stock from $34.35 to barely $2 a share, officials with embattled SystemSoft Corp. say they're mulling a future that could include a possible sale of the troubled software firm.
Following a tense conference call involving shareholders and analysts last week, Deborah Besemer, SystemSoft's new president, said the topic of selling the company was brought up, and has been broached by SystemSoft's executive board.
"We would consider selling the firm if it would work for the shareholders," Besemer said. "But we think selling it at the price it's at now would not be the way to maximize value. We need to restore confidence in our technology to give it value and make it more marketable."
Besides its huge financial setbacks, SystemSoft, which last month announced the layoff of more than 50 of its employees, is also embroiled in a lawsuit that alleges it misrepresented its financial status and the popularity of one of its new products, among other things.
Analysts seem to be at odds over SystemSoft's future.
One analyst who requested anonymity and whose firm owns SystemSoft stock said he believed the company would be sold in the near future.
"We would like it to sell. A lot of money has been lost and we want something back," said the analyst.
However, Steven M. Frenkel, an analyst with Paragon Capital Corp. in New York, put some of the blame for SystemSoft's situation on his own kind, who he said overvalued the company in early 1996.
"It's the analysts' fault," Frenkel said. "They made projections based on products that weren't marketed right."
He added: "This is the beginning of a new SystemSoft. Selling the company now would be a classic case of panic and selling at the bottom."
SystemSoft's has taken a beating of late, with the company reporting two straight years of fiscal losses. Much of the slide has been attributed to slow sales of its SystemWizard trouble-shooting software and reduced product demand in Asia.
For its 1997 fiscal year, SystemSoft reported a net loss of $37.6 million, or $1.70 a share, on revenue of $39.7 million.
Things did not get much better in SystemSoft's 1998 fiscal year ending Jan. 31. The company reported losing $19.7 million, or 76 cents a share, on revenue of $42.6 million.
For the first quarter of its 1999 fiscal year, SystemSoft reported losing $5.9 million, or 22 cents a share, on revenue of $4 million, compared to net income of $2 million, or 8 cents a share, on revenue of $12.5 million for the same quarter the previous year.
The company's stock has lost enough value to make even the hardiest investors shudder.
Last week, SystemSoft shares traded at about $1.82 each, up from a 52-week low of $1.63 on May 19. The stock's 52-week high was $14.50 a share on July 28, but even that was far from the $34.35 a share the stock traded at in Sept. 1996.
As if SystemSoft's continued financial woes weren't enough bad news, the company announced in early May it would lay off 54 employees, reducing its work force to 185.
SystemSoft also was recently named as a defendant in class-action lawsuit alleging the company violated the U.S. Securities and Exchange Act by releasing positive reports about industry acceptance of SystemWizard in order to boost stock value.
The shareholder suit, filed by several different law firms, including Boston-based Berman DeValerio & Pease LLP, San Diego-based Milber, Weiss, Bershad Hynes & Lerach LLP and Barrack, Rodos & Bacine of Philadelphia, alleges that in January 1996, when SystemSoft stock was trading at about $4.38 a share, company insiders released reports that attributed its "record growth" to "customer acceptance of our products" and the "continued acceptance of SystemSoft's technologies by a growing customer base."
The suit alleges SystemSoft officials then let the stock get as high as $34.13 a share, and sold over a million shares for over $21 million, before releasing negative financial reports that led to the stock's plummeting value.
Besemer said the future of SystemSoft relies on its SystemWizard software. SystemWizard is used by call centers to analyze and determine the cause of, and also remedies for, computer malfunctions.
The software has been slow to take off, despite receiving many positive reviews from industry analysts.
Besemer, who joined SystemSoft as president and chief operating officer in November 1997 after 11 years at Cambridge-based Lotus Development Corp., said the company is trying to develop more original equipment manufacturing (OEM) partnerships and revamp its sales staff.
Analysts such as Paragon's Frenkel, are remaining optimistic the company could recover from its financial troubles, and agreed selling the firm would be the wrong step to take at this time.
"They've basically got new management and they need a chance to operate," said Frenkel.
Frenkel argued Besemer and her team should not be punished by financial problems that existed before they joined SystemSoft.
"She (Besemer) came in late in the game, after the platform business had dried up and the squeeze was already on," Frenkel said. "What they're trying to do now is change their pricing structure and invent a new paradigm that is going to work. But they're going to need about 12 to 18 months to see results."
"I look at it like a restart." said Steven B. Frankel, an analyst with Adams Harkness & Hill Inc. in Boston. "They've laid off people, refocused their SystemWizard business and done what needs to be done when you're facing big money problems. They have the potential for getting things right now, but it will take time to be sure." |
