August 18, 2010 / 8:44 PM / 7 years ago

UPDATE 2-Open Text profit up on higher revenue, cost cuts

* Q4 GAAP EPS $0.89 vs Street view $0.86

* Revenue $240 mln vs est $243.9 mln

* Executive says Microsoft upgrade good for business (Adds CEO quote, background; in U.S. dollars unless noted)

TORONTO, Aug 18 (Reuters) - Open Text Corp’s OTC.TO quarterly profit rose sharply on strong revenue growth and cost controls, the Canadian business software firm said Wednesday.

Net income rose to $51.5 million in the fourth quarter, ended June 30, from $19.5 million a year earlier. That equated to earnings per share of 89 cents, compared with analyst forecasts for 86 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 18 percent to $240 million from $203.4 million, with licenses bringing in $68.5 million of that.

The Waterloo, Ontario-based company has the second largest share of the market for enterprise content management (ECM) after IBM Corp (IBM.N) and partners with tech infrastructure vendors SAP AG (SAPG.DE), Microsoft Corp (MSFT.O) and Oracle Corp ORCL.O.

A recent free upgrade to Microsoft’s Sharepoint platform could hit Open Text’s market share, RBC Capital Markets analyst Mike Abramsky said before the results release, downgrading the stock to “neutral” from “outperform.” He also cited a dearth of acquisition targets in the note. [ID:nSGE67H0ID]

Open Text said that, while Microsoft may have been a threat in the past, a more symbiotic relationship had developed.

“To be honest, we see Sharepoint has expanded our market,” the firm’s president and CEO, John Shackleton, said on a conference call after the results.

“For customers who need DoD (U.S. Department of Defense) certification for records management ... digital asset management as well as our interfaces to SAP and Oracle are really enhancing that relationship. We’re seeing Sharepoint helping us,” he said.

He said the firm had completed the integration of recent acquisitions, including Web media company Vignette in 2009 and tech consultancy Burntsand this year, and was on the lookout for more buyouts. The firm was not considering a dividend payout in the foreseeable future, he said.

Open Text shares closed up 36 Canadian cents at C$38.41 in Toronto on Wednesday, but were well off their year high of C$51.92. The results were released after markets closed.

The global ECM market was worth $3.3 billion in 2008, according to research firm Gartner, which forecast the market will grow around 9.5 percent annually through 2013. ($1 = $1.03 Canadian) (Reporting by Alastair Sharp; editing by Rob Wilson and Andre Grenon)

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