Lawson Software has always been unique in many aspects within the enterprise applications market and has consequently had a smooth ride for more than two decades since its inception. The vendor has continued with the same differentiating tune, albeit somewhat amended as to stifle unavoidable external disturbances during the last two years. One of these disturbances would be the losing fiscal 2003 year with crippling revenues (a 20 percent decline in total revenues and nearly halved license revenues compared to fiscal 2002), after twenty-six years of seemingly unstoppable growth, positive cash flow and arguable profitability (if one is to exclude the $30 million charge for accretion on and conversion of preferable stock in fiscal 2002, and a similar adjustment for fiscal 2000, see Figure 1).
Still, a moderate recovery seems to have taken place during last several months. Thus, more encouraging news took place on September 25, when Lawson Software, Inc. (NASDAQ: LWSN), an enterprise solutions provider for service organizations in certain industries, reported total revenues of $88.0 million for its fiscal 2004 first quarter ended Aug. 31, 2003, which was almost flat compared with revenues of $87.4 million for Q1 2003. However, license fee revenues increased a notable 25 percent to $22.7 million in the quarter, compared with $18.1 million a year ago (see Figure 2). On a generally accepted accounting principles (GAAP) basis, the company posted net income of $3.2 million in Q1 2004, compared with a net loss of $1.9 million for Q1 2003. The company's cash, cash equivalents, and marketable securities were $255.2 million at August 31, down slightly from $260.5 million at May 31, 2003.
According to Lawson's officials, the witnessed return of year-over-year license revenue growth was driven by a strong quarter from the health care vertical. The company signed 153 deals in the quarter. Of the total licensing activity in the fiscal 2004 first quarter, 58 percent came from new customers and 42 percent from existing customers. During the quarter, the company signed nineteen new customers at an average selling price of $730,000, compared with twenty-three new customers at an average selling price of $333,000 a year ago. The company signed four software licensing agreements valued at more than $1 million. Significant or strategic wins included: Catholic Health Initiatives, Trinity Health, and Sherman Health in the health care vertical, W. S. Badcock in the retail vertical, and Orange County Transportation Authority in the public sector.
The still recovering financial results might indicate that Lawson's vertical focus has not necessarily been an impervious strategy against the economic slowdown and increasing competition. The company has therefore had to trim its workforce a few times, sometimes even by a double-digit percentage, in an effort to cut costs. The most recent took place a few days before the above financial report, when Lawson announced it would cut 82 jobs or 5 percent of its workforce and that it plans to transfer some development work to India, where many competitors have increasingly been finding a cheap labor heaven. The company has lost a fifth of its workforce (down to over 1,500 now) since before its first major round of layoffs in June 2002, when it laid of 110 employees or 5 percent of its erstwhile workforce. The worst layoffss, however, took place in September 2002, when the vendor cut over 230 jobs, or 12 percent of its employees. Still, by reacting to current realities and adjusting its operational plans quickly to support the firm's strategic goals, along with aligning everyone's actions toward those goals, the company has demonstrated impressive management and financial discipline.
Despite the above hardships, Lawson sticks to its focus on selected vertical markets, but going forward the tenets of that focus will likely be more finely tuned. Namely, the vendor has lately accelerated development, in part through a number of appetizing acquisitions of its traditional vertical functionality to ensure continued success in its target industries. Taking the corporate performance management (CPM) tune to heart, the company is focusing its product, marketing, and sales efforts on its vertical core strengths, particularly health care, retail, and the public sector industries.
However, one more horizontal, cross-industry acquisition took place on the same date of the financial report announcement, when Lawson Software announced the acquisition of Closedloop Solutions Inc., a privately held provider of applications to help businesses with financial budgeting, planning, and forecasting in a collaborative fashion. The acquisition is expected to significantly strengthen Lawson's Enterprise Performance Management (EPM) offering, which has in the past partly been built around the technology provided by Hyperion Solutions. The acquisition is also in tune with the current trend of tier 2 ERP providers availing themselves with performance management vendors; Geac's recent acquisition of Comshare being a case in point (see Geac Gets Its Commonsense Share Of Consolidation, With Revolving Door CEOs No Less). As for tier 1 vendors, they have mostly achieved native capabilities for analytical and financial processes within the supply chain. To that end, Closedloop Solutions' applications also enable organizations to implement more dynamic and responsive financial management processes and encourage collaboration among both financial and business line managers.
Lawson's dominant vertical market has always been health care, where it serves more than 400 health care industry customers representing more than 4,500 facilities, including eight of the top ten integrated delivery networks. The company also serves managed care systems, academic medical centers, hospitals, clinics, physician group practices, home health care, long-term care, and other health services enterprises. Lawson solutions were devised to help health care organizations manage their business so they can focus on their patients, automate and streamline materials management for a better bottom line, and manage the challenges of labor shortages by helping health care organizations hire and retain the right employees.
To further lead the pack in terms of functionality, on October 1, Lawson announced Lawson Grant Management, a comprehensive application specifically designed to streamline health care research administration. The new product tracks grant-funded research from notice of grant award to award closeout, enabling grant administrators to more efficiently and effectively manage labor distribution, salary encumbrances, effort reporting, and indirect costs. The product comes at a time when steady growth of federal funding for health care research means many health care organizations now commonly manage multiple grants simultaneously, while the government scrutiny of how those funds are used is increasing.
Developed in collaboration with a few leading health care organizations, Lawson Grant Management is aimed at academic medical centers, children's hospitals and other health systems and hospitals with sponsored research programs. It is integrated with other Lawson suites, such as Lawson Financials, Lawson Procurement and Lawson Human Resources, and enables more timely effort reporting needed to comply with federal regulations. It is based on a process model that encompasses all management processes involved in a grant's life cycle, from allocating award budgets and tracking staff and indirect costs to creating effort reports through the award close. Lawson touts the key expected benefits would include: 1) increased efficiency and reduced costs, 2) reduced compliance risk, 3) enhanced cash conversion cycle and 4) improved decision-making. Lawson Grant Management is expected to be available by the end of 2003.
Further, on September 24, Lawson announced a definitive agreement to acquire Apexion Technologies Inc. (www.apexion.com), a San Francisco, CA-based provider of health care surgical instrument and supply tracking applications based on a scalable mobile architecture. The definitive agreement is subject to Apexion shareholder approval and is expected to be finalized within forty-five days. Lawson expects to retain most of Apexion's twenty full-time employees. Lawson also expects this action to provide it with a strong competitive advantage over its traditional arch rival, PeopleSoft, which currently has a partnership with Apexion. Maher Hakim, the current president of Apexion Technologies, will become vice president of product development within Lawson's health care business unit.
Apexion's Apex SIM applications give hospitals greater visibility and control of materials and surgical instruments by providing greater mobility to workers involved in materials management and central supply. With a better view of inventory, instrument location and status, hospitals should be able to reduce excess inventory, improve instrument utilization rates and increase the productivity of staff assembling surgical carts. This should directly improve a hospital's bottom line and patient care by reducing the number of delayed or cancelled surgeries. Apexion's technologies will deepen the functionality of Lawson's health care suite and expand its current mobile platform to include Microsoft's Windows CE operating system for wireless handhelds, which is reportedly becoming more pervasive within the health care market and scales to support large numbers of users. Lawson plans to introduce a new product based on Apexion's applications and mobile platform by the end of this year.
Still, a moderate recovery seems to have taken place during last several months. Thus, more encouraging news took place on September 25, when Lawson Software, Inc. (NASDAQ: LWSN), an enterprise solutions provider for service organizations in certain industries, reported total revenues of $88.0 million for its fiscal 2004 first quarter ended Aug. 31, 2003, which was almost flat compared with revenues of $87.4 million for Q1 2003. However, license fee revenues increased a notable 25 percent to $22.7 million in the quarter, compared with $18.1 million a year ago (see Figure 2). On a generally accepted accounting principles (GAAP) basis, the company posted net income of $3.2 million in Q1 2004, compared with a net loss of $1.9 million for Q1 2003. The company's cash, cash equivalents, and marketable securities were $255.2 million at August 31, down slightly from $260.5 million at May 31, 2003.
According to Lawson's officials, the witnessed return of year-over-year license revenue growth was driven by a strong quarter from the health care vertical. The company signed 153 deals in the quarter. Of the total licensing activity in the fiscal 2004 first quarter, 58 percent came from new customers and 42 percent from existing customers. During the quarter, the company signed nineteen new customers at an average selling price of $730,000, compared with twenty-three new customers at an average selling price of $333,000 a year ago. The company signed four software licensing agreements valued at more than $1 million. Significant or strategic wins included: Catholic Health Initiatives, Trinity Health, and Sherman Health in the health care vertical, W. S. Badcock in the retail vertical, and Orange County Transportation Authority in the public sector.
The still recovering financial results might indicate that Lawson's vertical focus has not necessarily been an impervious strategy against the economic slowdown and increasing competition. The company has therefore had to trim its workforce a few times, sometimes even by a double-digit percentage, in an effort to cut costs. The most recent took place a few days before the above financial report, when Lawson announced it would cut 82 jobs or 5 percent of its workforce and that it plans to transfer some development work to India, where many competitors have increasingly been finding a cheap labor heaven. The company has lost a fifth of its workforce (down to over 1,500 now) since before its first major round of layoffs in June 2002, when it laid of 110 employees or 5 percent of its erstwhile workforce. The worst layoffss, however, took place in September 2002, when the vendor cut over 230 jobs, or 12 percent of its employees. Still, by reacting to current realities and adjusting its operational plans quickly to support the firm's strategic goals, along with aligning everyone's actions toward those goals, the company has demonstrated impressive management and financial discipline.
Despite the above hardships, Lawson sticks to its focus on selected vertical markets, but going forward the tenets of that focus will likely be more finely tuned. Namely, the vendor has lately accelerated development, in part through a number of appetizing acquisitions of its traditional vertical functionality to ensure continued success in its target industries. Taking the corporate performance management (CPM) tune to heart, the company is focusing its product, marketing, and sales efforts on its vertical core strengths, particularly health care, retail, and the public sector industries.
However, one more horizontal, cross-industry acquisition took place on the same date of the financial report announcement, when Lawson Software announced the acquisition of Closedloop Solutions Inc., a privately held provider of applications to help businesses with financial budgeting, planning, and forecasting in a collaborative fashion. The acquisition is expected to significantly strengthen Lawson's Enterprise Performance Management (EPM) offering, which has in the past partly been built around the technology provided by Hyperion Solutions. The acquisition is also in tune with the current trend of tier 2 ERP providers availing themselves with performance management vendors; Geac's recent acquisition of Comshare being a case in point (see Geac Gets Its Commonsense Share Of Consolidation, With Revolving Door CEOs No Less). As for tier 1 vendors, they have mostly achieved native capabilities for analytical and financial processes within the supply chain. To that end, Closedloop Solutions' applications also enable organizations to implement more dynamic and responsive financial management processes and encourage collaboration among both financial and business line managers.
Lawson's dominant vertical market has always been health care, where it serves more than 400 health care industry customers representing more than 4,500 facilities, including eight of the top ten integrated delivery networks. The company also serves managed care systems, academic medical centers, hospitals, clinics, physician group practices, home health care, long-term care, and other health services enterprises. Lawson solutions were devised to help health care organizations manage their business so they can focus on their patients, automate and streamline materials management for a better bottom line, and manage the challenges of labor shortages by helping health care organizations hire and retain the right employees.
To further lead the pack in terms of functionality, on October 1, Lawson announced Lawson Grant Management, a comprehensive application specifically designed to streamline health care research administration. The new product tracks grant-funded research from notice of grant award to award closeout, enabling grant administrators to more efficiently and effectively manage labor distribution, salary encumbrances, effort reporting, and indirect costs. The product comes at a time when steady growth of federal funding for health care research means many health care organizations now commonly manage multiple grants simultaneously, while the government scrutiny of how those funds are used is increasing.
Developed in collaboration with a few leading health care organizations, Lawson Grant Management is aimed at academic medical centers, children's hospitals and other health systems and hospitals with sponsored research programs. It is integrated with other Lawson suites, such as Lawson Financials, Lawson Procurement and Lawson Human Resources, and enables more timely effort reporting needed to comply with federal regulations. It is based on a process model that encompasses all management processes involved in a grant's life cycle, from allocating award budgets and tracking staff and indirect costs to creating effort reports through the award close. Lawson touts the key expected benefits would include: 1) increased efficiency and reduced costs, 2) reduced compliance risk, 3) enhanced cash conversion cycle and 4) improved decision-making. Lawson Grant Management is expected to be available by the end of 2003.
Further, on September 24, Lawson announced a definitive agreement to acquire Apexion Technologies Inc. (www.apexion.com), a San Francisco, CA-based provider of health care surgical instrument and supply tracking applications based on a scalable mobile architecture. The definitive agreement is subject to Apexion shareholder approval and is expected to be finalized within forty-five days. Lawson expects to retain most of Apexion's twenty full-time employees. Lawson also expects this action to provide it with a strong competitive advantage over its traditional arch rival, PeopleSoft, which currently has a partnership with Apexion. Maher Hakim, the current president of Apexion Technologies, will become vice president of product development within Lawson's health care business unit.
Apexion's Apex SIM applications give hospitals greater visibility and control of materials and surgical instruments by providing greater mobility to workers involved in materials management and central supply. With a better view of inventory, instrument location and status, hospitals should be able to reduce excess inventory, improve instrument utilization rates and increase the productivity of staff assembling surgical carts. This should directly improve a hospital's bottom line and patient care by reducing the number of delayed or cancelled surgeries. Apexion's technologies will deepen the functionality of Lawson's health care suite and expand its current mobile platform to include Microsoft's Windows CE operating system for wireless handhelds, which is reportedly becoming more pervasive within the health care market and scales to support large numbers of users. Lawson plans to introduce a new product based on Apexion's applications and mobile platform by the end of this year.
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