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Dan Goldstein, chairman of Magic Software Enterprises (MGIC) - Get Magic Software Enterprises Ltd. Report and the Formula (FORTY) - Get Formula Systems (1985) Ltd. Report group, will take over the posts of CEO Jack Dunietz and president Israel Teiblum, who quit yesterday after announcing a profit warning for the fourth quarter.

Today Goldstein told

that he couldn't say much beyond a promise to rehabilitate the company.

Goldstein picked Magic off the floor once already, when Formula first invested in Magic and its parent company,


, in 1998. At the time Magic had failed to market its application generator, and traded at $2 a share. Goldstein managed to transform the company, restoring its profitability and lifting its stock to $33, before yesterday' warning sent it plunging 13% to $2.50, 92% below its peak.

Magic carried out an offering earlier this year, and then dropped a profit warning for the second quarter. The weak Japanese market delayed orders, Goldstein explained. Now he's being more cautious. "We may have indeed been rash to have acquired several Magic-based software houses to develop applications without preparing the proper marketing channels," he says.

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Magic's third quarter report indicates that what allowed it to meet forecasts were lower-than-predicted marketing, sales, research and development expenses. "This is not going to happen in the fourth quarter," Goldstein says. "In the last quarter we have significantly increased marketing and research and development expenses. Whatever the short-term cost, we are building a mid- and long-range company."

Magic yesterday predicted $23 million in sales for the fourth quarter and a loss of $6 million. Analysts' forecasts were for 5 cents a share profit; now it's predicted to lose 23 cents.

Magic explained the profit warning by a slowdown in investment in new computer systems by its customers and by one-time expenses related to the company's reorganization.

"Many deals were postponed to 2001, and companies are now reviewing their investments in computer systems," Goldstein said, but added that he is "certain that the deals will happen in coming quarters.

Magic said that the response to its new products has been gratifying and that it has completed the efficiency drive and the personnel cuts in newly acquired



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