Lawson Software reports $21M in net income amid sales rumors

St. Paul-based Lawson Software reports it had net income of $21 million for the three months that ended February 28; nearly 12 times the company's bottom line from the same period a year a year ago.

Sales hit nearly $200 million.

The company cancelled a conference call with stock analysts set for Thursday afternoon even though Wall Street is eager to hear more from Lawson about the $1.8 billion dollar buyout offer the company received earlier this month.

Analysts expect other bidders may emerge, but the company and some analysts say a sale isn't a sure thing. Infor, a Georgia software firm, has offered $11.25 a share for Lawson.

Scott Berg, an analyst with Feltl and Company in Minneapolis doubts Lawson will agree to a buyout for less than $14 a share, even though a major investor, billionaire Carl Icahn, appears ready to settle for less than that.

"He's one of the ones pushing for it," Berg said. "In fact, he's recently been quoted saying he thinks the company should be sold to the highest bidder, doesn't matter what the price is."

Icahn owns about 11 percent of Lawson.

"This is an acquisition that happens only if the price is right."

Lawson is not a software industry giant. It has annual sales of about $750 million and only about 2,300 employees, including 800 in downtown St. Paul. That compares to Microsoft's employee total estimated at around 90,000.

But, Lawson is a very big provider to a couple of sectors -- health care, and state and local governments.

"Lawson is a powerhouse," said Ray Wang, CEO of Constellation Research, a California research and advisory firm.

Wang said Lawson provides software that helps an organization run just about every aspect of its operations, including payroll, sales and inventory.

"It's software designed for businesses to run effectively, and it's mainly focused around finance and HR," he said.

Wang said Lawson has a 30 to 40 percent market share for such "enterprise" software for state and local governments. He said Lawson is also the dominant software provider in health care. And he said it's one of the top three providers of what's called human capital management software. That's software that helps people manage other people.

Those strengths make Lawson very attractive to potential buyers -- and to billionaire Carl Icahn.

Icahn has made billions investing in businesses he sees as badly managed or undervalued and ripe for sale. Icahn saw Lawson as undervalued, and he's been steadily buying shares in the company over the past year or so.

The sharp-elbowed investor the Wall Street Journal once dubbed a "Corporate Hell-Raiser" owns about 11 percent of Lawson. Icahn is known for buying a big stake in a company and then pushing for its sale.

Lawson stock has soared in the past year. The Bloomberg news service estimates Icahn could make more than a 50 percent gain on his investment if Lawson is sold.

With the report of their earnings, Lawson could see some higher bids coming in, according to Thrivent analyst David Rudow, due to the company's expertise and position in health care.

"That health care side is what in my mind would make Lawson very attractive as a potential take-out candidate. These guys would be a prime candidate for take-out from an Oracle or SAP," Rudow said.

A federal mandate that hospitals and medical clinics adopt electronic medical records and billing systems could have a lot to do with that. Lawson's software helps health care providers organize and manage electronic medical records.

Some analysts, though, expect Lawson could remain independent, despite Icahn's desire for a sale.

"To me, this is an acquisition that happens only if the price is right," said Scott Berg, an analyst with Feltl and Company in Minneapolis. "And if the price is not right, it won't happen."

Berg thinks the odds of a Lawson sale are 50-50, and he said the current offer of $11.25 a share is too low.

"Any sale that gets done is probably going to be done in the $14 to $15 range -- maybe $16 on the high side. But it's probably $14 a share," Berg said.

But so far, no higher bids have been disclosed.

Ray Wang, the California consultant, expects if a deal is going to get done, it will happen in time for Lawson's upcoming annual customer conference next week. That would provide an opportunity to reassure customers about the future of software in which they've invested their companies and millions of dollars, he said.

"If you want to complete an acquisition, you want to be able to communicate with the customers," Wang said. "Lawson's customer conference would be the right time to introduce the management team and what the vision would be for Lawson's customers.

Investors clearly expect a higher offer to emerge. Lawson's stock closed Wednesday at $11.96 -- a stout 6 percent above the only offer currently on the table.

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