Shares of Lawson Software ( LWSN), which reported somewhat disappointing fiscal second-quarter results and third-quarter guidance, slumped Tuesday as investors digested a raft of unsettling news. But the business software maker is close to an historic bottom and may well be positioned for a comeback later in the year. "Is the market being too hard on the company today? I don't think so," says Mike Marzolf, a fund manager at Thrivent Financial. "But I'd be surprised if it doesn't bounce back," he adds. Shares of Lawson closed Tuesday off 37 cents, or 5.2%, to $6.75. Marzolf notes that the company is trading at close to 1 times enterprise-value-to-sales, a level generally seen as a floor for enterprise software stocks. Late Monday, Lawson reported a loss of $3.5 million, or 2 cents a share, compared with a profit of $6.6 million, or 6 cents a share, in the previous year. Excluding items, Lawson would have posted earnings of $5.4 million, or 3 cents a share, compared with the profit of 4 cents expected by analysts polled by Thomson Financial. Quarterly revenue jumped to $184.5 million from $89 million a year ago, due to the consolidation of revenue from Lawson's acquisition of Intentia International in April. The results exclude $3.9 million in deferred maintenance and service revenue.
Guidance for the third quarter called for a third-quarter profit of 2 cents to 3 cents a share (excluding items) on revenue ranging from $183 million to $191 million. Wall Street, though, was looking for a profit of 6 cents a share on sales of $192 million. Part of the weakness on the bottom line is a result of complex tax issues related to the Intentia acquisition, the company said. Indeed, the complexity of Swedish accounting procedures
delayed the deal's close by months, CEO Harry Debes said last year. Unfortunately for Lawson, the company's third quarter falls near the beginning of the calendar year, software's worst quarter -- a coincidence that makes investors less inclined to forgive a weak forcast, says Marzolf, whose fund does not hold shares of Lawson. Analyst Peter Goldmacher of Cowen rates the stock an outperform, but in a note to clients after the announcement he said, "Despite management's bullishness, it is clear that the acquisition of Intentia represents a more significant integration and financial forecasting challenge than previously thought." Like Marzolf, though, he believes the stock is close to a floor, and says that the company's financials, particularly free cash and deferred revenue, have been hurt as it shifts customers to a common expiration date for maintenance agreements. In the long run, however, the shift should drive increased revenue, he added. Cowen does not have an investment-banking relationship with Lawson. Lawson closed off 37 cents, or 5.2%, to $6.75.