Magic Software Enterprises (Nasdaq:MGIC), a provider of state-of-the-art application development technology and business solutions, reported today second quarter revenues of $15.67 million, down from $16.75 million posted in the previous quarter and from $20.19 million in the comparable quarter of 2001.

Gross profit margin in the second quarter of 2002 was 54%, a decrease from a margin of 56% in the comparable quarter of 2001 and 56% in the previous quarter.

The company lost a net $371,000 or 1 cents per share, versus losing $3.02 million or 10 cents per share in the year-ago quarter. In the prior quarter it made a net profit of $151,000 or 1 cents per share.

Software tool sales for the quarter, at $4.14 million, increased from $3.97 million in software tool sales posted in the first quarter of 2002 and decreased from $4.58 million in the comparable quarter of 2001.

Application sales were $1.87 million for the reported quarter, compared with $2.31 million in the first quarter of 2002 and $3.07 million in the second quarter of 2001.

Revenues from consulting and other services, at $6.98 million, decreased from $7.8 million in the first quarter of 2002, and $9.44 million for the second quarter of 2001.

Revenues from maintenance and support were $2.67 million, compared with $2.67 million in the first quarter of 2002, and $3.11 million in the same period of 2001.

In the second quarter of 2002, North America accounted for 36% of total revenues, while Europe and Asia/Pacific accounted for 33% and 31% respectively.

"I'm encouraged that even in the most difficult times in the IT industry that we have seen in many years, Magic Software was able to increase software tools sales for the quarter as compared to the first quarter of 2002," said Menachem Hasfari, chief executive officer of Magic Software Enterprises.

He said the company was continuing to reduce expenses in line with the economic slowdown.

"Our cash burn remained low during the second quarter of 2002 and, as a result, during the first six months of this year, we used $1.25 million net in cash versus $6.59 million net during the six months ended June 30, 2001.

"While we've suffered a slowdown in the USA during the quarter, and to a larger extent in our European operations, our achievements in the Asia-Pacific region have exceeded our expectations," Hasfari added.

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