October 22, 2014 / 11:49 PM / 4 years ago

UPDATE 2-Cloud computing services help boost Open Text profit

(Adds CEO comments, analyst comments)

By Tanvi Mehta

Oct 22 (Reuters) - Soaring demand for cloud services helped Canadian business software maker Open Text Corp’s more than double its first-quarter profit.

Net income rose to $64.6 million, or 53 cents per share, from $30.6 million, or 26 cents per share, a year earlier.

The cloud services business, which helps customers make use of software, services and content over the Internet, accounted for $150 million in revenue in the first quarter ended Sept. 30, its best ever growth rate of 260 percent.

Open Text, whose customers include Oracle Corp and Microsoft, has focused on cloud as businesses increasingly turn to cheaper services hosted online over proprietary software.

The company earned $58.6 million from license services in the first quarter, short of analysts expectations.

Quarterly revenue from customers paying license fees rose 6 percent, the company, which makes software to help companies manage documents and workflows, said.

“The company spoke about a soft economic backdrop which is causing the shortfall in license services,” Cormark Securities analyst Richard Tse told Reuters.

Despite a trend toward cloud services, Open Text does not expect to lose its market share for license services.

“I take a view different from others. I don’t think everything is cloud. We believe the world is hybrid.” Chief Executive Officer Mark Barranchea told Reuters in an interview.

Cloud services business accounted for 33 percent of the company’s total revenue of $453.8 million - a growth of 40 percent. The company gets more than half of its revenue from the United States.

Open Text expects cloud services to account for 28 to 33 percent of total revenue in fiscal year 2015.

Open Text, known to make frequent acquisitions, bolstered the business by buying GXS Group Inc for $1.17 billion last year.

Barranchea said the company plans to spend about $3 billion in acquisitions in coming years. “We’re looking to work out roughly $3 billion in capital over the next few years” he said.

Shares of the company fell about 3.8 percent in trading after market hours.

The Waterloo, Ontario-based company earned 97 cents per share on an adjusted basis in the first-quarter.

Open Text’s U.S.-listed shares have risen 20 percent this year through Wednesday’s close. The company’s Canada-listed shares have risen about 25 percent in the same period.

The Canadian information technology index rose 16 percent in the same period.. (Additional reporting By Narottam Medhora in Bangalore; Editing by Joyjeet Das and Cynthia Osterman)

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