CDC Corp. had its enterprise software business to thank for the lion's share of record revenue in the third quarter, ended Sept. 30, 2007.
The enterprise software and new media company, based in China, reported total revenue of $99.6 million, a 27% increase from $78.2 million in the 2006 third period, marking the highest revenue for a third quarter and its second-best revenue quarter ever. CDC Software contributed a whopping $89.5 million to that total.
Even so, the record revenue intake was not enough to squeeze out an overall profit. The company lost $7.1 million in the quarter, a slide from net income of $3.2 million a year earlier. CDC blamed the loss on lower revenue in its CDC Games and Mobile Value Added Services businesses, as well as several one-time factors, including a $1.6 million charge for restructuring in its CDC Software business, which involved cutting redundant positions created by recent acquisitions.
For its part, CDC Software's revenue was up 46% from $61.3 million in the 2006 third quarter. Software license revenue accounted for $15.2 million; maintenance revenue, $23.6 million; software consulting and services revenue, $24.9 million; and business services revenue, $23.7 million. During the quarter, the company sold its Ion Global business, which resulted in lower business services revenue, but acquired supply chain software and consulting services provider Catalyst International, which added to the software and services revenue.
CDC Software signed 63 new customers for enterprise software applications and 293 new customers for add-on and departmental software. Also, the company signed upgrade and expansion agreements with 357 enterprise software customers. New customers accounted for 32% of total software license revenue in the quarter, the company said.
The Americas accounted for 48% of revenue, CDC Software CEO Eric Musser told analysts on a conference call Friday. He noted that the company has expanded beyond its small and midsize comfort zone into tier 1 accounts, following efforts to build a "more mature and robust sales force and to make strategic acquisitions around the world," he said.
Company executives reported that the planned spin-off of CDC Software would very likely be completed during the first half of 2008, following regulatory review. The company had said during the second quarter that it might complete the IPO in 2007 and that it was looking to raise $225 million from investors.
That cash infusion would help the company continue its strategy of buying distressed technology assets and turn them around. CDC is also following a "verticalization" strategy.
Musser said the company will "continue to invest to expand the vertical capabilities of our products." For example, he said the food and beverage industry is drawn to the traceability functionality of the company's ERP products. "The competitive climate has worked in our favor as consolidation has disrupted the market and created gaps that we are able to address," he said.
In response to a question from an analyst, Musser said he has been scanning CDC Software's key markets for any signs of a slowdown in spending, and found that the food, chemicals, and life science sectors appear to be holding firm. "We feel good about the pipelines we have today and going into 2008," he assured analysts.
The company declined to provide future guidance, pending completion of the software business' IPO.