While OpenText's figures for Q4 -- announced after the close of business yesterday -- were not as good as it may have hoped for, there is a silver lining as it ends the year in an economic climate that is currently looking up.
OpenText Fails To Meet Expectations
In this recent round of earnings releases we have seen a number of big IT companies failing to meet financial analysts’ expectations. OpenText also failed to meet expectations, which resulted in a drop of 5% in its share price after trading closed yesterday.
However, overall it was a good year with a number of product innovations and launches, leading OpenText CEO Mark J. Barrenechea to predict a better year in Financial 2014 once a number of changes in the way it does business are implemented.
Our FY14 focus is intelligent growth, a commitment to growing earnings, cash flows and creating value for our stakeholders while investing in the markets where we can win. These investments include broader EIM capabilities, expanding our distribution, both direct and through partners, expanding our presence in the cloud and furthering our reach into fast growing markets” he said in a statement around the release of the figures.
OpenText Q4 Figures
The figures themselves however, in practical terms, were not all that bad, given some of the weaker sets of figures we have seen from IT companies for the end of this quarter.
OpenText’s figures show profits of US$ 42.2 million over the quarter, up from US$ 8 million in the same quarter last year. However, Q4 figures in 2012 were dragged down by a US$ 20 million income tax charge, without which, OpenText would have reported profits of US$ 28 million.
OpenText reported revenues for the quarter of US$ 347 million, up 14% on the same quarter last year. Revenues for the entire year were US$ 1.3 billion, up 13% for the year.
Unable To Close Sales
There are some notable highlights -- and low points -- in the figures, not least of which was its ongoing growth in the cloud computing space. One notable element that doesn't bode well for the company in the coming year -- even if Barrenechea says they are dealing with the problem -- was its inability to close sales in North America or Latin America, which combined made up 54% of its Q4 revenues.
Our issues in North America were a bit focused on the U.S. West as well as Canada. We had the pipeline, we simply couldn't convert it," Barrenechea said.
He also added that the company is working on the problem even if he didn't say how. Even with the existing problems, OpenText was still able to close 5 deals with more than US$ 1 million and 15 worth more than US$ 500,000 over the quarter.
Dealing With Problems
We can speculate that OpenText has been dealing with some of its problems through restructuring and training. Over the course of the quarter, it spent US$ 4.2 million on restructuring in North America and Europe and expects to spend another US$ 5 to 6 million in the first half of the next fiscal year on the same thing.
Sales team training also seems to be part of its solution, although it didn't go into this in any great detail.
… With our sales organization expanded and fully trained, and our leadership position established as a premiere EIM provider, we demonstrated 6% organic license growth in the second half of FY2013 over the same period last year,” Barrenechea said.
Cloud Computing Developments
There were a number of positive points that will carry the company through the next few quarters, and even years. Cloud services continued to grow and contributed 12% to its revenue over the quarter -- which may have been helped by the ongoing integration of EasyLink cloud services that it bought last year for US$ 232 million, as well as the development of new enterprise information management products to support SAP HANA cloud and mobility solutions.
Given the difficult trading conditions IT companies are working in at the moment, this year has been a good one for OpenText. With Barrenechea describing 2013 as a “pivotal year,” we should be watching out for better performances by the end of Q1 2014.