Lawson Software, Inc. (LWSN) recently updated its prior guidance for the fourth quarter ending May 31, 2010.
Management reaffirmed its prior revenue guidance of $194 million – $198 million for the fourth quarter.
Revenues are projected between $196 million and $200 million, including $2 million of deferred Health Vision revenue that was impacted by purchase accounting.
As part of the management’s initiative to restructure and simplify the operation structure, the company decided to consolidate and eliminate positions in its M3 operations on a global basis.
The M3 segment includes food, fashion, equipment services management and rental verticals along with Asia-Pacific and Latin American business.
Lawson expects to streamline its workforce by 150 to 200 positions, less than 5% of its total workforce. Going forward, the company plans to invest in its strategic S3 and M3 growth verticals, and therefore might increase its workforce in these areas in the coming twelve months.
Lawson now expects to incur a pre-tax restructuring charge of $5 – $7 million relating to its plan to restructure its workforce primarily in its M3 operations in Europe, the United States and Manila, Philippines.
The company will record a majority of the restructuring charge in the fiscal 2010 fourth quarter which will impact EPS. The remaining charge will be recorded in the next quarter.
However, the exact reduction count in each country has not been fully identified at this time. Hence the company was not able to provide the exact impact of this charge on the bottom-line in the fourth quarter.
Management had earlier projected an EPS around 4 cents – 6 cents. Excluding approximately $10 million of pre-tax adjustments for amortization expense, non-cash stock-based compensation expense, non-cash interest expense and a one-time gain related to the modification of a defined benefit pension plan, EPS is forecasted around 10 cents – 12 cents.
The current Zacks Consensus Estimate for fiscal 2010 is 35 cents, up by a penny in the last thirty days. However, the estimate has downward potential of 2.86%.
For the fourth quarter, the current Zacks Consensus Estimate is 10 cents, towards the lower end of the guidance provided by management. Business conditions in the US and Europe are starting to improve, but the recovery is likely to be choppy.
Management expects to see a broad improvement in business spending in late 2010 – early 2011. The company currently targets vertical markets for growth and continues to focus on improving services margins.
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