Florida unit has yet to feel impact of corporate restructuring
Concerned with profits and shareholder value, Geac Computer Corp. Ltd. is restructuring and reducing its work force. Meanwhile, with little direct influence on the fate of a parent that may be sold, attention at Geac's Publishing Systems division remains directed at selling systems that deliver value to newspaper customers.
"We have not seen the licensing generated by the sales force that's up to what we budgeted or expected" for the past two years, former Chairman and CEO William G. Nelson said last fall while serving as
interim head of the diversified computer software and services firm based in Markham, Ontario. "Particularly in newspapers, we have a significant pipeline, but the closes aren't there yet," he added, attributing the situation to what seemed to be a lengthening sales cycle -- "a conclusion" he said could change if there were no pick-up in sales by the year's end.
But through March, no new conclusions were announced following completion of a 20-week-long restructuring analysis undertaken in cooperation with financial advisers. Of the impact on Geac Publishing Systems, Investor Relations Vice President Michel GElinas would "not comment on a lower level" than the ongoing effort to improve profitability and maximize shareholder value. The Publishing Systems unit reported no cuts.
After announcing third-quarter results this month, Nelson's successor, John E. Caldwell, said he was "not in a position to comment further ... at this time" on the review of strategic alternatives. "This process is taking longer than originally anticipated," he said, adding that he expected to provide an update this spring.
Before making his remarks last October, "Nelson never actually shared this insight with me," said Publishing Systems President Bernard Grinberg. "I'm not told what happens at that level." In the larger perspective, he commented that "as the price of the stock hasn't risen a lot, I think that the company is still vulnerable to takeover. I think it's trading below its value."
Of his own division, Grinberg said he thinks "we've improved the business" in a climate of "fierce competition" during a time of steep price cutting. "It's tough. We have to be careful. We're not growing." He added that the division has seen no significant personnel changes and nothing related to restructuring.
In the last years of proprietary publishing systems, chemical companies, notably DuPont, got into the newspaper systems business -- with little success. Today, large software firms are trying their hand at it. Well before last year's acquisition of longtime U.S. suppliers System Integrators Inc. and CText by Germany's net-linx, venerable vendors of newspaper systems Collier-Jackson (U.S., business applications) and Cybergraphic (Australia, editorial and advertising production systems) were bought up by Canada's Geac Computer Corp., rolled into a publishing systems division at Collier-Jackson's old headquarters in Tampa, Fla., and joined by Matrix (U.K., circulation- distribution software) as well as Gazette Technologies (U.S., data warehousing).
Grinberg was a Cybergraphic founder who spent much time in recent years running the company's business in North America, a market that last year seemed to drift into the doldrums. The division did find its first U.S. circulation customer, Tupelo's Northeast Mississippi Daily Journal, which bought Matrix Single Copy and Direct Subscriber modules for 30 users.
Geac Publishing Systems continues to lock up Cybergraphic's home market.
The New Zealand Herald, a user of Atex's much-esteemed Enterprise ad system and killed-before-marketed Deadline newsroom system, has begun replacing the former with Geac Cla$$Page. The Wilson & Horton Ltd. flagship is possibly the first site to replace Enterprise. (In North America, Geac lost its own ad system customer to Sweden's Mactive, when the Milwaukee Journal Sentinel decided not to upgrade its Cybergraphic system.)
"We put in a Geac editorial system last year," said Wilson & Horton Managing Director John Sanders, explaining that the new system eventually will function as a hub, supporting the newsrooms of the group's eight regional dailies (it also publishes 35 nondailies).
The same approach will be taken with the now-installing Geac ad system, the contract for which is just waiting for "a couple of clauses to be tidied up" by the lawyers, Sanders said last Wednesday. He expected the sale to be inked in a week or two.
Approximately 170 seats will serve the Herald, with the system supporting 120-130 more when the regionals are later brought on line. "The principal reason" for choosing the system, said Sanders, "was that the Geac system has proven itself" capable of "hubbing" multiple sites. After the experience beta-testing Deadline, Sanders added, there was no interest in trying a system that couldn't be seen already working satisfactorily elsewhere. Sanders also was unhappy with local support at the time from Atex. Enterprise had been used for three or four years, but the difficulty with the classifieds, he said, was that the modules that had been turned on did not enable multipublication booking, and the Herald couldn't quote for contract customers.
"We probably would have stuck with our Enterprise system," Sanders said, had its booking worked as the paper wanted. When it didn't, he said, the prospect of establishing a hub allowing one system to serve the entire group made a switch to Geac attractive, even though Enterprise wasn't fully depreciated.
The new Geac ad system interfaces to the Herald's J.D. Edwards financial system. On the circulation side, the paper was a pre-Geac Matrix customer, having begun working with the British developer about three years ago.
In Australia, McPherson Media Group (with 15 regional papers) recently signed to become the first fully integrated Geac Media and Sales Command user, including real-time Web output. The project initially will shift 50 newsroom staffers to CyberNews and CyberPage, while ad personnel will use Cyber Cla$$Page. Fast, high-capacity servers running SQL Server-7 database software will support sites in two states.
Last year Geac sold Independent Newspapers Ltd. (INL) editorial, advertising, pagination, accounting, and output capabilities for the thrice-weekly Wimmera Times-Mail in Horsham, Victoria: It shares a content database via a 120-mile connection to an existing Cybergraphic Genesis II system at the daily Bendigo Advertiser -- a model INL may replicate elsewhere. Both sites' CyberOPI Server with replication software allows them to exchange local content, including ads and images, and benefit from each other's potential as a back-up site.
Geac also upgraded its systems at the Hong Kong Standard to produce that broadsheet's tabloid successor, iMail.
Other recent home-market sales included MediaServer, from the Software Construction Co. (SCC), Atlanta, at The West Australian, Perth, in time for coverage of the 2000 Sydney Olympics, with economical distribution of integrated archival image access and live picture desk functionality for nearly 150 users. Storage of and access to 20,000-plus live images and more than 160,000 archival images rises daily, as 38 channels feed images through SCC's MediaFactory application.
Between its acquisitions and its third-party software sales, Geac has followed a partnership strategy for product development. Last year, it paired with Applix, Westboro, Mass., to incorporate the latter's iEnterprise Internet-based customer-relationship management and real- time analytics into its Command Series publishing products. Geac also may sell iEnterprise as a component of other enterprise-resource- planning and industry-specific solutions. Beyond helping manage the publisher-customer relationship, Grinberg saw decision- making potential in marrying iEnterprise to the capabilities of Geac's MarketInfo data warehousing.
Geac Publishing Systems also negotiated with Netherlands-based WoodWing Software to develop products based on the latter's plug-in technology for Adobe Systems InDesign software and Geac LayoutXpert, which automates most layout work with Geac CyberPage editorial pagination. Development of LayoutXpert-based products for QuarkXPress also was contemplated.
Companywide, Geac offers an array of applications supporting enterprises ranging from manufacturing to services to public administration. Under former CEO Douglas Bergeron, it showed big increases in sales and net income for the year ended last April 30, when divestiture of vertical businesses in the interest of boosting shareholder value already had begun, with the sale of Geac's banking- systems business. But Bergeron warned of impending "revenue and earnings weakness" in several Geac businesses, although the climate remained favorable for a strategy that accounted for more than 60 acquisitions.
In late summer, Geac confirmed that two parties had approached it for "possible transactions" and that it had retained CIBC World Markets as financial adviser. Days later, first-quarter revenue that modestly surpassed the year-earlier figure was bolstered by proceeds from the sale of the banking-systems business, but hurt by lower overall sales and a strong Canadian dollar. Less the gain on the sale of banking systems, ongoing operations showed a net loss. A few days later, Geac said it asked investment banker Lazard Freres & Co. to add its European operations and technology strengths to CIBC's North American operations expertise.
Just before its second quarter concluded, Geac's $225 million in syndicated revolving credit expired. At that time, it repaid $5 million, leaving approximately $60 million outstanding under the arrangement, and CEO Caldwell said no further acquisitions were planned. By early this month, it had repaid $23 million more and extended until next week its discussions with bankers concerning the credit facility.
"We intend to enter into a definitive agreement" with the banks, Caldwell said this month. "We also plan to seek new financing over the coming months." Geac reported reducing aggregate bank debt from approximately $99 million to $56 million since mid-December.
By early October, Bergeron had resigned as CEO and board member. Nonexecutive Chairman Nelson, who preceded Bergeron, was appointed interim CEO, and Caldwell was elected a director and appointed president and chief operating officer. Two weeks later, Geac announced a share buyback to increase the value of shareholders' equity.
At month's end, second-quarter revenue was down to $203.8 million (Canadian) from C$237.1 million a year earlier, with a net loss of C$56.5 million, compared with net income or C$19.7 million in second quarter 1999. The decline from first-quarter 2000 revenue was small, but margins had improved.
Acknowledging the low prices paid for technology companies since last spring, Nelson said Geac's financial advisers would assist in determining which of its businesses Geac would "prune out," and that acquisitions, as well as the sale of "all or part of the company," were possibilities. He expected "to have a deal ... consummated" by last month, although any transaction may be delayed one or two quarters for "technical" reasons.
The company's "profit improvement initiative" encompasses a work-force reduction of 500 of its 4,700 jobs -- 150 through attrition, the balance in layoffs -- and "infrastructure cutbacks" aimed at cutting annual costs by C$60 million, with a one-time pretax charge of as much as C$20 million to have been taken largely in the second quarter. Staff reductions are not "uniform across all divisions," said Nelson. Specifically, realty and property management are among divisions with unchanged staffing. Geac's Pyramaz subsidiary (an application services provider of enterprise-resource-planning e-business infrastructure solutions) and e-purchase business will receive up to C$4 million annually in additional resources.
This month, Vice President and Corporate Controller Linda Mezon said head count totaled "just over 4,000." Except for the loss of one overseas in-country manager, she said, no turnover occurred within senior management.
Job cuts were selective because "we want to nurture" those businesses that "have a real future," Nelson said. "Some of our businesses," he continued, "we're milking them anyhow, and since they're not going anywhere, we might as well milk them even more. And a couple of them we probably should shoot -- gracefully, of course." He declined to identify which businesses were in jeopardy, "because that would have a negative impact on customers."
The fate "is obvious" for any part of the company that is "not going to carry its weight [if] we can't come up with a way to make it carry its weight," Nelson said. "We're not going to tolerate a long unprofitable streak any longer."
Nelson returned only briefly to the role of CEO, intending to work with Caldwell, then step aside, according to GElinas. In November, Geac appointed Charles S. Jones, chairman of investment firm First Funding Corp., as nonexecutive chairman. A month later, it named Caldwell president and CEO. Nelson remains on Geac's board.
Before his departure, Nelson said he was working on "real improvement ... not playing around with balance sheets, which we've done in the past with acquisitions -- 'playing around' is the wrong phrase, but, you know, we have written off things on the balance sheet that don't really affect cash flow." By looking at "real cash expenditures" and "going back to the old shoe-box mentality of Geac," he said, "we're going to make sure we generate cash" and will "not close out any option" to accomplish what's best for the company.
Since those remarks near the end of its second quarter, Geac has seen its cash position improve "substantially during the third quarter," ended Jan. 31, thanks to seasonally higher maintenance contract renewals and successful cost reductions. Caldwell said Geac met its restructuring goal of third-quarter profitability and that units still showing unacceptable profit levels will be dealt with in the fourth quarter.
The company took a one-time charge of C$211.4 million, a write-down on the value of software and goodwill, almost all related to the 1999 purchase of JBA Holdings. Caldwell said that the London-based midmarket, enterprise-resource-planning software supplier had not performed to expectations but is "marginally profitable" and believed to be "stabilized" now.
Third-quarter revenue from continuing operations was C$218.0 million, compared with C$203.8 million in the preceding quarter and C$278.3 million in the third quarter of the preceding year. Adjusted third- quarter net income from continuing operations (excluding the large write-off) was C$33.5 million, compared with an adjusted net loss (after unusual items) of C$16.8 million in the second quarter and adjusted net income of C$39.5 million in the preceding year's third quarter.…