Drumroll please, Mark.
And here are the results.
Phoenix Technologies Reports Fourth Quarter Results
Phoenix completes acquisitions of Award and Sand
San Jose, Calif. (October 22, 1998) -- Phoenix Technologies Ltd. (Nasdaq: PTEC), a leading supplier of standards-based system software and semiconductor IP for PCs, peripherals and information appliances, today reported results for its fourth quarter and fiscal 1998. The results for previous periods have been restated to include the results of Award Software International Inc., which was acquired in a pooling of interests in September 1998. The Company also completed the acquisition of Sand Microelectronics, Inc. in late September in a transaction that was recorded using the purchase accounting method.
Revenue for the quarter was $29,088,000, as compared to $29,579,000 in the fourth quarter of the previous fiscal year. Revenue for the fiscal year was $122,885,000, compared to $105,496,000 for fiscal 1997.
Net income for the quarter and the fiscal year, excluding acquisition and restructuring charges, were $2,200,000, or $0.08 per diluted share, and $13,915,000, or $0.52 per diluted share, respectively. The amounts for the prior year, excluding a nonrecurring gain on the sale of securities, were $4,896,000, or $0.18 per share, for the quarter and $16,087,000, or $0.59 per share, for the fiscal year. The excluded charges in the fourth quarter of fiscal 1998 were as follows:
$5,677,000 for professional fees and other expenses in connection with the Award merger.
$4,053,000 for merger and restructuring expenses ($4,803,000 for the fiscal year), including the disposal of redundant facilities, severance benefits for employees in redundant positions and discontinuance of overlapping products among Phoenix, Award and Sand.
$4,250,000 for the value of in-process research and development acquired in the Sand purchase.
Not included in the fiscal 1997 fourth quarter results was the gain on the sale of the remaining 20% of the Company's former publishing division. Eighty percent of the division was sold in 1994.
"These acquisitions broaden Phoenix's technology base, expand our product breadth and increase our ability to support customers on a world-wide basis," said Jack Kay, President and CEO. "The integration of the three companies has started off very smoothly," according to Mr. Kay, "and we expect to see the results of these benefits and increased economies of scale within fiscal 1999. While final government clearance of the merger took much longer and cost far more in professional fees than we anticipated in April when we announced the transaction, we are very satisfied that it was well worth the extra effort. Both Award and Sand bring critical mass, excellent technology and very competent teams to Phoenix. The proximity of the three companies in the San Jose area will make for a smoother and quicker integration."
Total revenue increased 16% in fiscal 1998 over fiscal 1997. PC software and services revenue increased 12%; revenue from information appliances, including Award embedded and internet products, increased 32%, and the Virtual Chips semiconductor IP product line increased revenue performance by 73%. "With these acquisitions," according to Mr. Kay, "Phoenix has not only strengthened its leadership position in key market segments, but also made a significant step in increasing the portion of revenue from markets growing faster than the PC market."
On a regional basis, semiconductor IP revenue contributed to 10% growth in North America for the quarter, and the region grew by 20% for the fiscal year. The economic recession significantly impacted Japan and Asia. Although Japan revenue growth for the fiscal year was 17%, there was a year over year decline in the fourth quarter. Asia, excluding Japan, decreased 10% in the quarter, but increased 1% for the year. "However, the continuing shift to outsourcing by major brand PC OEMs to Taiwan for both desktop and notebook PCs provides encouragement for future growth in the Asia region." according to Mr. Kay.
The Company announced the agreement to merge with Award in April. The merger was approved by both companies' shareholders in June and completed in September after the Department of Justice completed their five month review under the Hart Scott Rodino Antitrust Improvements Act. Under the agreement, Award shareholders received 1.225 shares of Phoenix common stock for each share of Award common stock. In September, the Company also completed the acquisition of Sand for approximately $18.5 million in cash, 460,000 shares of restricted Phoenix common stock, the assumption of outstanding stock options and up to $4 million to be paid out over 3 years based on the Company's expanded Virtual Chips/Sand business unit's financial performance.
Investors are cautioned that quarterly revenues depend on completing new contracts (a disproportionate number of which are finalized near the end of the quarter), as well as the volume of customer shipments on existing contracts which are outside of the Company's control. In addition, the success of the merged Company will depend upon a number of factors, including the Company's ability to implement a smooth transition of the impacted customers and company operations, achieve the anticipated cost savings and other benefits of the acquisitions, and to satisfactorily complete and market the acquired technologies. Except for historical information contained herein, the matters discussed in this news release are forward looking statements that involve risks and uncertainties which may cause actual results to differ from those anticipated by Phoenix. Investors are encouraged to review Phoenix's Form 10-K for the fiscal year ended September 30, 1997, filed with the Securities and Exchange Commission, for a more complete discussion of such risks.
Phoenix Technologies is a leading innovator and supplier of enabling software and services fundamental to personal computers, servers, peripherals and information appliances. Headquartered in San Jose, CA, Phoenix Technologies has offices worldwide, including California, Massachusetts, Oregon and Texas and Geneva, Hyderabad (India), London, Munich, Seoul, Taipei and Tokyo. Information on Phoenix Technologies products is available at: phoenix.com, award.com and sand.com.
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