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With Lawson, patience could pay
The software company's stock is about $7, down from $11 in November. Some say it's poised to beat the market.
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Lawson Software warned last week that its first-quarter earnings would be less than expected. A day later, Forrester Research, a highly regarded market-analysis firm, warned that business spending on technology would be less than expected in 2009.
The current turmoil on Wall Street and its impact on corporate spending could make things even tougher for Lawson. Manufacturing customers already are affected, and the state and local government sector could be next if tax revenue shrinks.
"There's a financial meltdown occurring on Wall Street, possibly of epic proportions," said Mark Murphy, a Piper Jaffray analyst in San Francisco. "That could trickle its way through to the economy more broadly, having ramifications not just for Lawson, but for any technology vendor."
Lawson shares traded between $6 and $7.35 a share last week, down from just over $11 last November. The company, which is in a quiet period preceding its earnings release Oct. 2, could not comment.
Still, some analysts say Lawson represents a good investment for consumers willing to stick with it for a year. That's true especially when compared with its giant competitors, SAP and Oracle.
"I'd much rather own Lawson than competitor SAP at the current stock price levels," said Peter Goldmacher, an analyst at Cowen & Co. in San Francisco.
Lawson has a market capitalization (total shares times share price) of about $1.2 billion. Compare that with SAP's $69.3 billion , and California-based Oracle, which is at $103.6 billion.
In fact, Lawson's $852 million in revenue make it look less like its competitors than like its target customers -- enterprises with $250 million to $2 billion in revenue that are in fields such as health care, state and local government, retail and, more recently, manufacturing.
Analysts weren't particularly dismayed by Lawson's news last week.
Goldmacher said some fluctuation in earnings is to be expected because of the difficulties involved in a revamping of the company under CEO Harry Debes. Part of the change has involved a shift of some development and consulting jobs from the United States to Asia.
"The market will remain under pressure through the end of the year, but over the next 6 to 12 months Lawson will outperform the market," Goldmacher predicted.
David Rudow, an analyst at investment manager Thrivent Financial of Minneapolis, agreed.
"Over the next 12 months, Lawson stock should be a good investment, although if your investment horizon is only six months it could be a little rocky," Rudow said. "If I were a consumer investor, I'd wait until Lawson reports earnings in October, and then buy the stock if it takes a hit."
Lawson's stock is attractive because it's trading at only about 3.5 times its annual software maintenance revenues (a recurring cash stream considered a barometer of a software firm's strength). It previously traded at four times or higher, Rudow said.
Thrivent owns 961,000 Lawson shares, although it sold 149,800 in June to rebalance its portfolio, he said.
Steve Alexander • 612-673-4553
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