Software Maker Sales Decline; Best Software is No. 1 on List
By MIKE MASON
Orange County’s top software makers had a tough go of it in the past 12 months.
The 20 biggest software companies with operations in OC reported a 2% decline in sales to $2.2 billion, according to this week’s Business Journal list. The ranking is based on 12-month revenue through, for the most part, March 31.
The totals are the same when Business Journal estimates for four companies are factored out: The 16 software makers that supplied sales totals posted a 2% decline. This year’s sales decline follows sales gains on the two prior lists of 6% and 1%, respectively.
Local employment at the top software makers was flat at 4,144, though the number includes four estimates. Factoring out those estimates, OC employment fell 1%.
Close observers of the Business Journal list will note a new name at the top: No. 1 Best Software Inc. in Irvine. The Business Journal counted MSC.Software Corp. as the top software seller a year ago. But revenue results supplied by Best for 2002 were inaccurate; they were actually higher than previously reported by the company.
For the 12 months through September 30, Best had sales of $425 million, up 4% versus a year earlier.
The maker of accounting and other business software is part of Britain’s Sage Group PLC. Sage, which owns several brands in Europe and North America, does all of its North American expansion through its Irvine operation.
The company made two big buys in the past 12 months. It acquired Pleasanton-based Accpac International Inc. for $106 million earlier this year, and bought Portland, Ore.’s Timberline Software Corp. for about $103 million last summer.
Other acquisitions include buying the 11-worker business software development team from Macabe Associates in Seattle and South Africa’s Softline in November, which has a Novato-based unit called AccountMate Software Corp. Managers at AccountMate bought the business from Best in May.
Sage got its foothold in the U.S. when it bought Best for $445 million in 2000. The company has made about 45 acquisitions in its history.
No. 2 FileNet Corp. of Costa Mesa moved up a spot on the list despite a 2% decline in sales to $340 million.
The maker of database and content management software made one small acquisition in April 2003, snapping up Shana Corp. for about $8.5 million. The deal is typical of FileNet’s strategy: It hopes to buy companies that give it access to a complementary market, in Shana’s case, electronic forms.
At the time of the deal, FileNet Chief Executive Lee Roberts said his company plans to make a number of smaller acquisitions.
But FileNet has been quiet on the acquisition front since the Shana deal closed.
Meanwhile, the software maker opened an office in Singapore in April that’s set to serve as the company’s Asia-Pacific headquarters.
Also moving one ranking up the list was No. 3 Quest Software Inc. in Irvine. The database management software maker reported a 19% gain in sales to $304 million.
Quest plans to move this summer to space it bought and leased in Aliso Viejo from Fluor Corp. In March, Quest wrapped up its $115 million acquisition of Dublin, Ohio-based Aelita Software Corp.
Wall Street knocked Quest last summer after the software maker said an adding error in its accounting system had inflated past earnings results. Shares of Quest fell 18% on the news and the company was hit with a number of class-action lawsuits.
Moving down two spots on the list was No. 4 MSC.Software Corp. in Santa Ana, which had a 29% sales decline to $256 million for the 12 months through Dec. 31.
It’s been a tough year of restructuring and earnings surprises for MSC.
“Over the past 18 months, they’ve tended to miss every other quarter,” said Herb Tinger, an analyst with Advest Inc. in Hartford, Conn.
The company has taken steps to curb its volatility. This summer MSC stopped reselling computers that run its software. While convenient for customers, reselling computers tends to suck up resources and doesn’t contribute much to profits.
The maker of engineering software is dealing with other issues. Earlier this year, MSC said it would restate its 2001 and 2002 financial results to adjust for revenue recognition, stock options and other items.
No. 5 Epicor Soft-ware Corp. in Irvine moved up a spot with an 8% revenue gain to $155 million.
Epicor’s software culls data from manufacturing, distribution and accounting units for use in sales, marketing and customer support. It bought Minneapolis-based ROI Systems Inc., which makes enterprise software, for $21 million last year.
The software maker also made news on a different front: Its chairman and chief executive, L. George Klaus, topped the list of leaders of OC’s biggest public companies with $39.7 million in compensation in 2003.
No. 13 Interplay Entertainment Corp. of Irvine fell two spots with an 18% decline in sales to $36 million. The game maker is facing a number of hurdles, including the recent bankruptcy filing of its French parent Titus Interactive SA.
California’s labor board temporarily shut down Interplay, accusing the game maker of not paying employees’ wages, workers’ compensation insurance premiums and rent on its Irvine headquarters. The company later was allowed to reopen after paying its workers’ compensation insurance premium.
New to the list is No. 9 Kofax Image Products Inc. in Irvine. Kofax appeared on the list of hardware makers last year. The move was prompted by software’s bigger role at the company, which makes document imaging and management programs.
Also debuting was No. 19 Foundstone Inc. in Mission Viejo. Privately held Foundstone had sales of $20 million in the period, up 18% versus a year earlier.
Dropping off the list were former No. 19 Smith Micro Software Inc. in Aliso Viejo and last year’s No. 20 Markzware Software Inc. in Santa Ana. Neither of the software makers had enough sales to make the list cutoff.
