Fair Isaac Spikes on Sale Push

Shares rise 7% after stakeholder Sandell presses the company to explore sale options.
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Fair Isaac


stock took off Friday morning on news that an investor is putting pressure on the company to sell.

Thomas Sandell, CEO of

Sandell Asset Management

, sent a letter Friday to Fair Isaac CEO Mark Greene, urging the board to find a buyer. Greene joined the company in February.

Shares of the Minneapolis, Minn.-based software maker were up $2.60, or 7%, to $39.98 midday on heavy volume.

Sandell's letter stated that he was encouraged by new management plans to improve operating results but said a turnaround would be more successful if Fair Isaac were part of a larger organization or if it were taken private.

He urged the board to set clear benchmarks for management while evaluating strategic options, such as a sale. Sandell Asset Management recently acquired a 5% stake in Fair Isaac.

Fair Isaac did not return a call requesting comment.

The company's flagship product, FICO scoring, which brings in $170 million in revenue, is under threat from Vantage Score, a new credit-scoring product created by a consortium of Fair Isaac's three credit bureau customers.

"We expect it to be used to keep us honest in negotiations on price," CFO Chuck Osborne said at an analyst conference in May. Fair Isaac is suing Vantage Score for patent infringements.

Osborne said the company is now targeting organic growth of 7% to 10%, and EPS growth of 10% to 13%.

Revenue for the quarter ended March 31 was down 3.4% year over year, to $201 million. Net income was off 20.5%, to $21.4 million.

Management turnaround plans include selling off unprofitable products as it has already done with a mortgage application, expanding into China, putting more funding into R&D and discontinuing unprofitable professional services.

The company will buy back $200 million worth of shares remaining in a $500 million repurchase program authorized in November 2006, Osborne said.

Fair Isaac has a market cap of $2.3 billion and posted revenue of $823.6 million in 2006.