Hong Kong-based software, gaming, and Internet service provider CDC Corp. yesterday reiterated its earnings guidance for the second half of 2008, which the company had adjusted to reflect its increased expectations. On Sept. 16, the company revised its previous financial projection for the second half, saying that it expects adjusted earnings to be in the range of $10 million to $12.5 million in the period. That range was approximately 25% higher than CDC’s previous projection, issued on Aug. 26, when it said earnings would come in at $8 million to $10 million.
“We remain cautiously optimistic with regard to our performance due to the fact that, among other things, we have a highly recurring revenue stream from our installed customer base, including our maintenance revenues,” CDC Chief Executive Peter Yip said in a statement.
In its most recent quarter, CDC’s enterprise software unit reported revenue of $96.1 million from enterprise software licenses, consulting, and services, an 8.7% improvement over the $88.4 million the company reported in the like period of 2007. While license revenue dropped 20% below the year-earlier period, maintenance revenue was up 26%, while services revenue rose by nearly 12%.
In addition to its perennially healthy maintenance revenue, CDC pointed to a robust reserve of cash and cash equivalents it says will help see it through the current economic slowdown. The company finished its most recent quarter with non-GAAP cash and cash equivalents of approximately $230 million and generated positive operating cash flow in the first two quarters, of $5.3 million and $5.6 million, respectively.
“CDC has done a good job targeting companies who have legacy apps in dire need of modernization,” Forrester Research analyst Ray Wang told Manufacturing Executive today, noting that the company has been particularly successful in closing deals for its CRM products both with customers outside of North America and internationally dispersed North America-based process manufacturers — particularly those concerned with food safety.
Earlier this week, enterprise software leader SAP sent shock waves through an already weakened stock market when it announced that its third-quarter financial results will be well below previous expectations when it reports the numbers later this month, due to a “truly extraordinary” drop in sales.
While it stands to reason that enterprise software vendors will be negatively impacted by the global economic slowdown, Forrester’s Wang noted that, like CDC, “a lot of companies are making up for lost license revenue with services and maintenance.”
CDC will announce the results of its most recent quarter, which ended Sept. 30, early next month.