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Open Text stock jumps after results top guidance

Author Message

PostPosted: January 15, 2004 11:48 AM 

As published by

Open Text stock jumps after results top guidance

Updated: 10:43 a.m. ET Jan. 09, 2004

January 9, 2004 - (In U.S. dollars unless noted)

Shares in Open Text Corp. jumped 13 percent on Friday as analysts upgraded the software maker one day after it released preliminary second-quarter results that were stronger than expected.

Its shares were up C$3.35 to C$32 in Toronto and $2.43 to $24.83 on Nasdaq. They are now up 57 percent year-over-year.

Citing the positive pre-announcement, UBS upgraded Open Text on Friday to "buy 2" from "neutral 2", and raised its target price to $33 from $20.

"While we had anticipated upside performance, the magnitude was certainly a surprise," UBS analyst Jeffrey Fan said in a note.

National Bank Financial raised its target price to $34 from $30 and kept its rating of the stock at "outperform". It said that despite the run-up in its stock, Open Text remains cheap compared with other companies in the enterprise software sector.

After markets closed on Thursday, Open Text said its second-quarter results, to be fully announced Jan. 22, would be stronger than expected due to increased demand for its corporate data tracking products.

The Waterloo, Ontario-based company said preliminary results showed second-quarter adjusted net earnings per share of between 18 cents and 21 cents, and revenues of between $60 million and $62 million.

Analysts were expecting, on average, second-quarter adjusted net earnings per share of 16 cents and revenues of $53.1 million, figures the company forecast in October.

Open Text said demand for its software, which is used to track corporate data, benefited from a pickup in the overall economy and increased corporate scrutiny demanded by regulators and governments following scandals such as the collapse of energy trader Enron.

"It was strong growth, broadly based across all our geographies and across all our verticals," Chief Executive Tom Jenkins said on Thursday.

"But you know, in a word, I think the economy is improving," he said. "No question, in our business, it's paced a lot by compliance and the rise of compliance...things like Sarbanes-Oxley (corporate reform law in the United States)."

Jenkins said guidance would be updated on Jan. 22 when Open Text releases its full second-quarter results, adding: "We're going to update our guidance at our regular quarter call...but clearly we've got a pretty strong pipeline and pretty good visibility."

He said second-quarter results did not include its acquisition of German software company Ixos Software AG , a deal that should close by late January or early February.

But third-quarter results will include some aspects of Ixos, which it bought for $230 million in October.

The Ixos deal is expected to double Open Text's revenue and make it the top makers of so-called enterprise content management software, which helps companies archive and publish internal documents.

($1=$1.28 Canadian)

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