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To: Lizzie Tudor who wrote (26151)	11/4/2005 6:33:30 PM
From: stockman_scott	Respond to of 57684

Autonomy strikes another U.S. deal _________________________________________________ by Laura Board in London and Kate Gibson in New York TheDeal.com 4 Nov 2005 British software maker Autonomy Corp plc on Friday, Nov. 4, struck its third U.S. acquisition this year, agreeing to acquire struggling data retrieval software maker Verity Inc. for $507 million in cash. Autonomy, of Cambridge, England, said it would pay $13.50 for each share of Sunnyvale, Calif.-based Verity. That translates to a 30% premium over Verity's closing stock price of $10.37 Thursday. Autonomy's CEO and co-founder Mike Lynch justified the high premium in a conference call with analysts. "This acquisition makes strong strategic sense, combining leading technology and breadth of geographic presence," Lynch argued. Autonomy said it expects the deal would cut $20 million in costs from the combined company in the first year following the transaction's close. The deal, expected to close late this year or in early 2006, will result in a company that will keep the Autonomy name and Cambridge headquarters and boast a combined customer base of about 16,000. Shares in Autonomy climbed 14.5% to 366.75 pence by early afternoon in London as investors apparently believed the benefits of the deal more than offset the dilutive impact of a planned one-for-two share swap. On Wall Street, investors in Verity cheered the move, bidding up the company's stock by $2.81, or 27%, to $13.18 in late Friday trading. Simon Rawling, global head of project management consultancy PIPC, applauded the union. "This is about packaging two very complementary businesses to forge a larger, stronger business process management proposition, both in Europe and the U.S.," he said. Autonomy, whose products are used by about 1,000 customers, designs software that helps companies sort e-mail and Internet data and is best known for its customer relationship management software. It shares some major customers with its U.S. target, including the U.S. Department of Defense. Verity has a 15,000-strong customer base that includes Cisco Systems Inc. of San Jose, Calif.; Hewlett-Packard Co. of Palo Alto, Calif.; and New York's Verizon Communications Inc. But the company, which specializes in business search and process management software, has suffered a nearly 20% decline in its share price in the past year as profits have been dented by restructuring charges and customer payment delays. The deal highlights how small enterprise software companies including Verity appeal to investors because they are takeover targets, said Bert Hochfeld of Hochfeld Independent Research Group. "Any vendor with less than $1 billion of annual revenues would be a potential acquisition candidate," he added. Hochfeld pointed to a long list of targets for larger companies, including Aspen Technology Inc. of Cambridge, Mass.; Rockville, Md.-based Manugistics Group Inc.; i2 Technologies Inc. of Dallas; Chordiant Software Inc., based in Cupertino, Calif.; S1 Corp. of Atlanta; Carpinteria, Calif.-based QAD Inc.; Agile Software Corp. of San Jose, Calif.; Matrixone Inc. of Westford, Mass.; and SumTotal Systems Inc. of Mountain View, Calif. The acquisition is expected to add to Autonomy's earnings in the first full quarter following its close, Autonomy said. Lynch will retain his CEO title while Verity chief executive Anthony Bettencourt will oversee Autonomy Inc., the joined company's U.S. unit. For the fiscal year that ended May 31, net income at Verity was $7.4 million compared with $11.6 million the year before, and earnings continued to slide in its first quarter. Verity's sales were $142.6 million in fiscal 2005, compared with $124.3 million the previous year. Autonomy, by contrast, said Thursday that nine-month net profit more than doubled, rising to $7.5 million from $3.5 million, on sales of $64.5 million, up from $46.1 million. The Verity agreement follows two other U.S. purchases for Autonomy. The company in April agreed to pay $70 million for private equity-backed etalk Corp. of Irving, Texas, bolstering a recent move into the call center market. In January it bought San Francisco-based NCorp, which specializes in structured data handling, from private shareholders. UBS Investment Bank is underwriting a share sale for Autonomy to raise about $271 million to help fund the purchase.

To: Lizzie Tudor who wrote (26151)	11/4/2005 7:50:34 PM
From: stockman_scott	Respond to of 57684

Redmond guns for Google news.com.com

To: Lizzie Tudor who wrote (26151)	11/5/2005 12:46:25 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 57684

I'm getting more and more interested in NFLX, here is a good article A DVD Industry Insider Comments on the Video Rental Business and Netflix’ Advantage (BBI, MOVI, NFLX) An email from a DVD industry insider (he asked to remain anonymous) argues that the traditional movie rental companies’ key problem is their SG&A (sales, general and administrative) expenses. His analysis also illustrates the gulf between Netflix’ fundamental cost structure and Blockbuster and Movie Gallery’s: I’ve enjoyed your writing on the entertainment retail business and attached please find a data set I think you might interesting pertaining to the recent 50+% drops in share prices by MOVI and BBI. The true challenge to video stores is their store operating expense. Not a decline in revenue. Their SG&A costs are nearly 2x’s other peer retailers - sometimes higher. You have to visit Tiffany’s to get store operating expense anywhere close to those of video stores and Blockbuster has neither Carrera marble nor chandeliers. If Blockbuster could get their SG&A closer to 30%, even with a small contraction in the industry, their market cap should increase at least 8-fold. If they do not get their store operating expenses in line, they will go bankrupt. Blockbuster’s revenue is on par with Starbucks’ and nobody talks about Starbucks’ revenue problems. Blockbuster has 6,000 sq. ft. stores when 85% of their revenue comes off the back wall. Plus they need 11 FTE’s to operate a store. Ben & Jerry’s ice cream shops are a nice little retail concept but if they needed 12 times the space and 3 times the staff to operate, they’d never open a store. Here’s the SG&A analysis: Ticker Company Revenue Gross Margin SG&A Market Cap EV to Rev MOVI Movie Gallery $2,018,000,000 60% 59% $215,000,000 0.1x BBI Blockbuster $6,053,200,000 60% 51% $848,470,000 0.1x NFLX Netflix $506,228,000 45% 37% $1,410,000,000 2.8x BBY Best Buy $27,433,000,000 24% 18% $21,000,000,000 0.8x GME Gamestop $1,842,806,000 28% 20% $1,790,000,000 1.0x WAG Walgreens $37,508,200,000 27% 22% $45,400,000 1.2x BKS Barnes & Noble $4,873,595,000 31% 22% $2,410,000,000 0.5x TGT Target $46,839,000,000 33% 22% $48,220,000,000 1.0x WSM Williams Sonoma $3,136,931,000 41% 31% $4,350,000,000 1.4x TWMC Trans World Entertainment $1,365,133,000 36% 33% $203,750,000 0.1x TIF Tiffany & Company $2,204,831,000 56% 42% $5,460,000,000 2.5x SBUX Starbucks $5,294,247,000 59% 43% $10,690,000,000 2.0x You’ll note that GMs in the category are terrific, which probably explains the utter lack of discipline with store operating costs. Quick comment: I’m not sure about this. Perhaps high gross margins and high SG&A are the natural cost structure of a business where the cost of goods is low (it’s mainly digital content, after all) and the heavy costs are in distribution. I’d be interested to hear other readers’ thoughts. internetstockblog.com