Open Text shares rise on revenue increase but report says firm faces

TORONTO — Shares in software company Open Text Corp. rose almost 10% Friday after the company reported a fourth-quarter profit of US$8-million and 7% increase in revenue.The jump in the stock price came even as Scotiabank analyst Paul Steep said the stock may be challenged in the short term as the company implements operational changes.Steep said he expects the company to focus on growing its North American sales and integrating its new acquisition, EasyLink Services International Corp.Open Text signed a deal to buy the U.S. company in May for about US$310-million, including debt.[np-related]During the quarter, the company made changes to its senior management team and reorganized its North American sales force, said Steep.“Our view is that Open Text has undertaken a significant reorganization of its operations and that it will be a multi-quarter process before seeing significant returns from the planned additions to its sales organization,” said Steep in a report.“We believe the focus will now shift to the integration of EasyLink’s operations.”The company, which keeps its books in U.S. dollars, reported a fourth-quarter profit of 14 cents per diluted share on Thursday, down from $28.6-million or 49 cents per diluted share a year ago.Revenue totalled $305.6-million, up from $285.5-million.For the company’s full financial year, Open Text reported a profit of $125.2-million or $2.13 per diluted share on $1.2-billion in revenue. That compared with a profit of $123.2-million or $2.11 per diluted share on $1.03-billion in revenue in the prior year.Open Text sells software used by companies to manage their electronic documents.Scotiabank revised its sales estimates for the first quarter of the company’s 2013 financial year to $325-million, from $321-million.Earnings are predicted to be $88-million, or an adjusted $1.17 per fully diluted share, revised from $86-million, or $1.14 per share.For the full fiscal year of 2013, Scotiabank anticipates the company will report a profit of $390-million, or an adjusted $5.21 per fully diluted share, on $1.4 billion in revenue.“Our updated estimates mainly reflect a soft corporate IT spending environment, and our view that the firm’s sales force reorganization will be a multi-quarter process,” said Steep.Open Text rose $4.87 to $53.93 on the Toronto Stock Exchange on Friday.

Leave a Reply

Your email address will not be published. Required fields are marked *