November 24, 2009 / 2:33 PM / in 8 years

UPDATE 2-Canada's MKS Q2 profit rises, appoints new CEO

* CEO and largest shareholder to become exec chairman

* Promotes COO as new chief executive

* Q2 EPS $0.16 vs $0.13 yr-ago, rev falls 10 pct

* Ups dividend by 20 pct to $0.15/shr

* Shares rise 5 pct (Recasts, adds details, analyst comments, share movement)

By Amit Kumar

BANGALORE, Nov 24 (Reuters) - Canadian software and services provider MKS Inc MKX.TO posted a 19 percent rise in second-quarter profit, helped mainly by higher maintenance revenue, and said it appointed a new chief executive.

MKS said Philip Deck, its chief executive and largest shareholder, has been appointed executive chairman, while Chief Operating Officer Michael Harris has been promoted to the chief executive position.

Deck, who is stepping down as CEO “to focus on the strategic aspects” of MKS’ growth, will continue as chairman of the board, the company said in a statement.

MKS, whose customers include Lockheed Martin Corp (LMT.N), Canon (7751.T) and HSBC Holdings Plc (HSBA.L), raised its quarterly dividend by 20 percent to 15 cents a share.

The company said net income for the quarter rose to $1.6 million, or 16 cents a share, from $1.4 million, or 13 cents a share, a year ago.

“They were good results, in line with my expectations... ALM (application lifecycle management) licence revenue were a bit light, but they were able to make up with strong maintenance and service revenues,” BMO Capital Markets analyst Thanos Moschopoulos said by phone.

The company also benefited from lower operating expenses, helped partly by currency hedges, Moschopoulos said.

Total revenue fell 10 percent to $14.7 million. However, maintenance segment revenue rose 11 percent to $7.8 million.

Income from the ALM segment, the major contributor to MKS’ revenue, fell 9 percent to $13 million, while licensing revenue fell 40 percent to $3 million.

With a strong product portfolio, and improving economic conditions, “the big issue is when we see growth,” said Moschopoulos, who rates the stock at “market perform”.

Analysts on average had expected earnings of 13 cents a share, excluding special items, on revenue of $15.0 million, according to Thomson Reuters I/B/E/S.

The company said it plans to invest more in its sales force as it expects increasing demand in key customer sectors.

However, it expects a 10 percent annual decline in its interoperability business, which sells products related to cross-platform development, application migration, systems administration and network management.

Shares of the Waterloo, Ontario-based company were up 5 percent, or 44 Canadian cents, at C$9.25 in afternoon trade Tuesday on the Toronto Stock Exchange. (Reporting by Amit Kumar; Editing by Anne Pallivathuckal and Gopakumar Warrier) ((amit.kumar.edit@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 4135 5800; Reuters Messaging: amit.kumar.edit@thomsonreuters.com@reuters.net))

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