Analysts and investors will hear a familiar voice when they dial in to Epicor Software Corp.’s quarterly earnings call this week.
George Klaus, who ran the Irvine-based maker of business software for more than a dozen years, is back at the helm after a year-long stab at retirement.
Epicor’s directors brought back Klaus last month after a tumultuous 2008.
Klaus joked the board brought him back “for his good looks.”
A year ago, Klaus, 68, had handpicked his successor as chief executive, Tom Kelly. Klaus then went into semi-retirement as executive chairman.
In the 11 months he held the top post, Kelly helped integrate a $315 million acquisition of Britain’s NSB Retail Systems PLC, launched the company’s latest software package Epicor 9 and oversaw a restructuring with some 300 job cuts around the world.
On top of all that, Kelly fended off a hostile takeover bid by New York hedge fund Elliott Associates LP that dragged on for two months.
Directors decided that Epicor needed an experienced hand to steer the company through what stands to be more difficult months ahead.
“Tom had never run a software company of this size,” said Klaus, who called Kelly a “great guy.”
Before Epicor, Kelly was chief executive of Santa Clara’s MontaVista Software Inc., a maker of Linux software for autos, set-top boxes and other products. He had served on Epicor’s board since 2000.
Reason for Change
The prospect of a renewed takeover bid from Elliott was a factor in the leadership change, said Joel Fishbein, an analyst at Lazard Capital Markets LLC in New York.
Epicor’s directors “wanted to see someone with more seasoned experience in dealing with an environment with the potential for hostile bids,” he said. “You had a new CEO who isn’t very well-known in the software industry and the board probably wanted a veteran to steer them through murky waters.”
Some company watchers think Kelly didn’t get a fair shake.
“Kelly was given an opportunity to turn things around in a short period of time,” Fishbein said. “Frankly, he became a scapegoat for a challenging macro environment and he got squeezed when Elliott made its hostile takeover bid.”
Klaus acknowledged that Kelly faced a tough year in which Epicor’s stock fell 60% to a recent market value of $200 million.
“Looking at 2008 and the difficult market we went through and the market we are facing in 2009, the board was looking to do what was in the best interests of our customers, employees and shareholders,” he said.
Klaus signed a two-year contract.
He said he’ll again look toward retirement “eventually” and has no immediate plans to pick a successor.
Epicor is set to report fourth-quarter results on Wednesday.
Analysts largely have absorbed the news that the company’s financials will take a hit due to the larger economic decline and December’s launch of Epicor 9.
In October, Epicor said it’s expecting fourth-quarter profits, excluding charges, of $11 million to $17 million on revenue of $125 million to $140 million.
Analysts, on average, are looking for profits of $13 million on sales of $126 million.
“There’s no question that the business is under pressure,” said Peter Goldmacher, an analyst at Cowen & Co. in San Francisco. “I expect them to be constructive on their prospects and be hopefully realistic about what they need to do to keep things moving forward.”
Epicor makes what’s known as enterprise resource planning software. It helps midsize companies, including retailers and manufacturers, manage accounting, customer contacts, inventory, sales and other tasks.
Klaus said he’s pleased with the reception of Epicor 9 so far.
“We’ve had over 200 orders and half of those are new customers,” he said. “That’s exciting in this environment.”
Epicor 9 could boost the company’s results in the second half of the year, said analyst Steven Koenig of KeyBanc Capital Markets Inc. in San Francisco.
Klaus’ first task after reporting results is to find a finance chief for Epicor.
Michael Piraino stepped down in May and the company hasn’t yet found a replacement.
He went on to start investment company M2 Technology Partners LLC in Laguna Hills with Epicor’s former president and chief operating officer Mark Duffell last year.
The chief financial officer’s spot “has been vacant for 10 months and that’s unacceptable,” Klaus said. “We plan to get one as soon as possible.”
The lack of a top accounting guy was starting to bug analysts.
“Kelly was doing it without a CFO and they still haven’t hired one,” analyst Fishbein said. “The Street is looking for some visibility there.”
Klaus describes himself as a hands-on leader who doesn’t micromanage.
“I’m very active in the day to day,” he said. “My management style is to empower people to do their jobs. They are very familiar with the company and they are very familiar with me. I expect them to go deliver.”
