Aliso Viejo business software maker Quest Software Inc. has seen revenue rise
from increasing consumer demand and company acquisitions. But one analyst sees revenue slowing.
Quest has seen sales improve for software that builds upon programs made by Microsoft Corp. and others.
“This has translated into some large deals and we expect the average contract value to creep up this quarter,” Richard Sherman, an analyst for Greenwich, Conn.-based MKM Partners LLC, said in a note to clients.
Sherman said he expects Quest to surpass its $720 million revenue estimate for the year.
On average, analysts are expecting Quest to see roughly $101 million in profits on sales of $719 million.
A few weeks ago Quest paid $78 million to buy Phoenix-based NetPro Computing Inc., which makes software that helps optimize the Microsoft’s suite of software programs for big corporations.
A few NetPro executives are set to join Quest as the two companies consolidate operations. NetPro has some 175 workers.
Despite healthy top line growth, higher
costs could pinch profits.
“Our model shows that Quest would have to exceed the upper end of revenue guidance by more than $28 million to meet its margin target,something we think is unlikely in this current environment,” Sherman said.
Sherman lowered his estimate for operating margins,profits expressed as a percentage of sales,to about 16%. That’s less than Quest’s own estimate of 17.5% to 18.5%.
Quest had a recent market value of about $1.5 billion.
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Chase: Lantronix has “gotten a little dusty” |
‘Diamond in the Rough’
Irvine’s Lantronix Inc., a publicly traded maker of networking gear, is a “diamond in the rough,” said Chief Executive Jerry Chase.
“It has gotten a little dusty and a little out of touch with its customers and markets but there is tremendous opportunity to come in here and make it lean, more responsive and to get products in line with what customers want,” Chase, who took over the top spot in February, said.
Lantronix makes small electronic devices that allow vending machines, thermostats, retail terminals, ATMs and other things to be accessed via the Internet or other computer networks.
Chase said his primary jobs at Lantronix are “to come in from the outside with a clear and fresh perspective,” and to add shareholder value.
One of his first orders of business: to switch Lantronix’s focus from U.S-based customers to exploring more sales opportunities abroad.
“A growing portion of our business is in Europe and Asia,” Chase said.
Lantronix is in the midst of a big restructuring. This summer it cut about 20% of its local workforce in a move designed to save about $3 million a year.
“Sometimes you can do more with fewer people,” Chase said. “Although we had a lot of good people, we had way too many.”
The company has about 126 workers here.
Some products are in the works, including software that helps machines automatically send out calls for repairs.
Customers now are testing that software, dubbed “ManageLinx,” Chase said.
For the quarter ended June 30, Lantronix posted revenue of $15 million, flat from the same period a year earlier.
Including restructuring costs of $757,000, the company reported a loss of $1 million, more than the $89,000 it lost in the year-ago quarter.
Lantronix had a recent market value of about $27 million.
Chase came from Santa Clara-based Terayon Communications Systems Inc., a maker of digital video software.
He streamlined Terayon’s businesses by selling two of its three unprofitable units, tripled its sales and last year sold the company to Motorola Inc. for $140 million.
As for his rep as a turnaround artist, he said managing such transitions “can be gut wrenching and turn your hair grey.”
“We’ve taken some big steps and we feel really comfortable with them,” he said.
Iteris Deal
Santa Ana’s Iteris Inc., a maker of traffic management gear for cities, said it inked a deal to distribute wireless traffic monitoring gear made by Canada’s Encom Wireless Data Solutions Inc.
Encom makes products that enable the wireless transmission of video and other data.
The technology goes well with Iteris’ video cameras that are mounted on traffic lights.
The cameras act as sensors and change the light when a vehicle approaches.
Iteris’ cameras are replacing an older system that’s installed below ground and activated when a vehicle rolls over it.
Iteris also does consulting work for state and city agencies looking to do studies and find remedies for areas with particularly bad traffic.
Last month the company landed a contract with the Los Angeles County Metropolitan Transportation Authority valued at about $8 million.
