04/02/2010

Autonomy, Buy, Earnings Review/Sales Analysis - Confident Q4 presentation, Dr. Gunnar Plagge, gunnar.plagge@nomura.com, Autonomy: Earnings Review/Sales Analysis - Confident Q4 presentation
Investment Conclusion
We feel reassured that 1) OEM growth should re-accelerate in the current year, 2) the Power and Protect businesses seem to experience an unchanged underlying momentum and 3) the fact that Autonomy is close so signing its first megadeal in the promote area, is a first key validation of its meaning-based marketing strategy. For the SPE product Autonomy also reported its first revenue, the first OEM contract signing and talked about positive customer feedback. Looking at the overall top line we have slightly increased our 2010 top line forecast by about 2%, mainly driven by higher upfront revenue. Our 8% increase in EPS is mainly driven by an expected cost containment on opex and by greater confidence in the company returning to 90% gross margins. Overall the company’s improved disclosure was notable during the presentation. We reiterate our BUY recommendation with a target price of GBp1870

Summary
• Q4 results review
• Outlook for 2010 key
• Reporting on cash conversion
• Valuation methodology

Software AG - Q4 numbers meet helped by one-off: Software AGs top line came in 3% ahead of our expectations driven by a 12% higher WebMethods sales (license recovery in US, UK, Germany) and 11% higher IDS Scheer sales. Given the lower gross margin of WebMethods/IDS, the overall gross margin came in about 1% below our expectations. Opex was higher leading to operating profit 2% below our expectation. This was compensated by a number of one offs in the other operating income line (mainly an activation of financials in IDS), leading to reported net income 5% ahead of our expectations. FY 2010 guidance Software AG is guiding to revenue of about Eur 1080m (NOM 1116m) and EPS Eur 6.1 (NOM 6.4). We believe that growth momentum in IDS is lower and that legal dispute in Japan ETS is also having an effect. On the bottom line the company is guiding to net income growth of 10%, we have modeled ~20%. Company says that interest expense post IDS Scheer is 15-20m (software AG, Nomura Research).

IBM Agrees to Buy Initiate for Health-Care Software: IBM agreed to buy closely held Initiate Systems to gain programs that analyze data on medical patients. The software identifies duplicate patient entries and consolidates them, necessary for creating effective records, Jeff Jonas, chief scientist for IBM analytics, said in an interview today after the Armonk, New York-based company announced the deal. Financial terms weren’t disclosed. Initiate, based in Chicago, has more than 300 employees, he said. (Bloomberg)

Open Text F2Q10 - rev, EPS beat: Autonomy rival and provider of enterprise content management software, Open Text reported revenue for its fiscal second quarter ended December 31 of $247.8m, with adjusted EPS of 87 cents, ahead of the Street at $228.9m and 70c. OTEX is up $2.45, or 6%, to $43. (TechTrader)

RightNow Q4 Solid, But Stock Sags On Mixed Guidance: RightNow reported Q4 rev of $41.6m, up from $36.1m a year ago, and ahead of the Street at $39.8m. The on-demand software company posted non-GAAP EPS in the quarter of 10 cents, ahead of the Street at six cents. For Q1, the company sees revenue of $42 m to $42.5m, ahead of the Street at $40.3m, but with non-GAAP EPS of 6-8 cents, shy of the Street consensus at 9 cents. For all of 2010, RNOW expects revenue of $175m to $180m, ahead of the Street at $170.5m, with non-GAAP EPS of 39-45c, below the consensus at 47c. (TechTrader)