July 31, 2013 / 8:17 PM / in 4 years

Open Text software license sales miss forecasts, shares fall

(Reuters) - Business software maker Open Text Corp OTC.TO (OTEX.O) earned less in long-term license fees than analysts had expected in the fourth quarter, offsetting gains from its push into cloud computing.

Open Text shares were down 5 percent in post-market trading after closing at $70.53 on the Nasdaq on Wednesday.

Businesses are increasingly outsourcing their technology needs to companies that offer cheaper, nimbler products hosted in the so-called “cloud.”

Traditionally, software companies sold products with expensive, perpetual licenses that were a lot harder to update and maintain.

Open Text, a Canadian supplier of software to help companies manage documents and workflows, said quarterly revenue from customers paying license fees rose 1 percent to $78.8 million.

“(The) market was looking for 5 to 10 percent growth,” said Thanos Moschopoulos, an analyst with BMO Capital Markets U.S.

The license revenue business was affected by an inability to sell software licenses in North America, which along with Latin America contributed 54 percent to fourth-quarter revenue.

“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,” said Chief Executive Mark Barrenechea.

Waterloo, Ontario-based Open Text, whose customers include the U.S. government and consumer goods company Unilever Plc (ULVR.L), tapped the cloud computing platform market by buying EasyLink Services for $232 million in July last year.

Cloud services accounted for 12 percent of Open Text’s fourth-quarter revenue of $347.3 million. Analysts on average had expected revenue of $360.8 million.

“It (cloud service) was a touch lighter than we were looking for but not too surprising given that they are still integrating this asset,” analyst Moschopoulos said.

Open Text initiated a quarterly dividend of 30 cents per share, payable on September 30.

PROFIT UP ON CLOUD

Open Text’s fourth-quarter adjusted profit of $1.43 per share scraped past analysts’ estimates of $1.42 per share, according to Thomson Reuters I/B/E/S.

Profit rose to $42.2 million, or 71 cents per share, from $8 million, or 14 cents per share, a year earlier, helped by demand for the company’s growing cloud computing business.

Profit in the year-ago quarter was hit by a $20.7 million provision for income tax.

Reporting By Garima Goel in Bangalore; Editing by Robin Paxton, Maju Samuel

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