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The Enterprise System Spectator

Thursday, January 06, 2005

Lawson increases net loss, faces SEC investigation

Lawson Software continued its pattern of bad news yesterday. First, it announced Q2 results that are depressing: revenue of $83M (down 1.5% from the same quarter last year), license fees of $13.2M (down 23.6%), and a net loss of $3M, compared to a net loss of $1.3M a year ago. Only service revenues were up, 4.1%.

Second, Lawson said that the SEC has launched an "informal investigation" into its revenue recognition practices. In response, Lawson has already spent about $2.2M in fees and expenses to hire an independent accounting firm to investigate the situation--money that I'm sure customers would rather see spent on developing better software, rather than digging into Lawson's accounting practices.

Remarkably, CEO Jay Coughlan continues to blame Oracle for Lawson's financial problems. "Our license revenue came in as expected, given that the business environment during the entire quarter reflected the uncertainty of the Oracle/PeopleSoft merger," he said. I laughed when Coughlan tried out this excuse last quarter. Now, I'm concerned that he might actually believe it.

Lawson shares plunged over 11% in after hours trading, after the announcements. Over the past 3-4 months, Lawson has refused to say whether it could be the target of an acquisition. The latest news does not bode well for Lawson remaining an independent company.

Update, 6:35 p.m. Lawson's stock has recovered from the drop in after hours trading, finishing about even with the close yesterday. In addition, some analysts are upbeat about Lawson's prospects. According to CBS Marketwatch,
Lehman Brothers analyst Neil Herman said Lawson's pipeline for the current fiscal third quarter and the year looks good, adding that management was "more optimistic about business prospects than we have heard in quite some time"....

Herman also downplayed concerns about the SEC investigation, which centers on the company's revenue recognition practices, as Lawson has already completed an independent audit and found no major issues.

At Wells Fargo, analyst Eric Upin said he's still "very positive on the long-term picture for Lawson." ....

"We continue to see potential for further license growth, operating margin expansion, and, therefore, upside to our EPS projections, based on Lawson's market opportunity, strategy and new cost structure," he said.
CBS Marketwatch has more.

Related posts
Lawson shows the door to another 75 employees
Lawson fires 100, blames Oracle
Lawson joins earnings disappointment club

by Frank Scavo, 1/06/2005 09:46:00 AM | permalink | e-mail this!

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