January 9, 2009 / 5:33 PM / 10 years ago

Lawson Software shares up on strong Q2 results

Jan 9 (Reuters) - Shares of Lawson Software Inc LWSN.O rose more than 13 percent Friday, a day after the company posted second-quarter profit that beat analysts’ estimates, as operating margins improved, and forecast third-quarter profit that could match expectations.

Deutsche Bank analyst Tom Ernst said the third-quarter outlook seemed reasonable and shares continued to look undervalued. The company expects to earn 7 cents to 9 cents a share, before items, for the third quarter.

Ernst said Lawson’s pro-activeness in cutting costs through job cuts, and by focusing on selling software and not services, should help Lawson meet near- to mid-term targets despite the challenging environment.

He maintained his “buy” rating on the business-software maker’s stock.

However, the company, which competes with bigger rivals like SAP (SAPG.DE) and Oracle ORCL.O, said its prior outlook for 2009 could not be relied on.

In July last year, it had forecast a profit of 28 cents to 32 cents, on revenue of $920 million to $925 million, for 2009.

“The entire industry is experiencing a slowdown in demand. But ERP (enterprise resource planning) projects cannot be deferred indefinitely. ERP may not be sexy, but it is mission-critical, and it is proven,” CEO Harry Debes said in a conference call with analysts.

The company’s license revenue for the quarter fell 9 percent, hurt by a strong U.S. dollar and lower deals, while consulting revenue declined 15 percent due to fewer billable hours.

“We think the decline in contracting activity will continue for several more quarters, as customers remain skittish in a difficult economy. This trend will likely pressure license and consulting revenues in future periods,” KeyBanc Capital Markets analyst Steven Koenig said in a note to clients.

Koenig maintained his “hold” rating on Lawson’s stock.

Shares of the St. Paul, Minnesota-based company were up 49 cents at $5.00 in midday trade on Nasdaq. They touched a high of $5.10 earlier in the session.

For the alerts, please double-click [ID:nWNAB8132] (Reporting by Sayantani Ghosh in Bangalore; Editing by Amitha Rajan)

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