Newly independent CDC Software this week reported a lackluster sales performance in the second quarter ended June 30, its final full quarter as a subsidiary of China-based CDC Corp.
Revenue for the mid-market ERP specialist dropped 24% to $50.6 million, from $66.8 million in the second quarter of 2008. (When it spun off as a separate company, CDC Software left behind the Global Services unit whose revenue it had reported while under the parent corporation’s banner. It did not include the Services division in its second-quarter numbers.)
License sales fell sharply year over year, declining 43% to $7.8 million, although officials touted a 10% sequential improvement in license sales from Q1.
Nevertheless, the former CDC subsidiary managed to turn a profit, netting $5.9 million, turning around a loss of $241,000 in the prior-year period.
In a statement, CEO Peter Yip said, “Over the past several quarters, we have taken proactive steps to improve operational efficiencies and leverage our offshore product engineering centers in India and China.” That offshore infrastructure has helped the software maker accelerate its rate of new product releases, including its Pivotal CRM and Ross ERP products, its CDC Factory suite for manufacturers, and a smattering of supply chain-focused products, the company said.
In the second quarter, the company relied heavily on its installed base for software purchases, with 84% of license revenue in the quarter coming from repeat customers. “We believe that we have only begun our cross-selling initiatives into this installed base and that this represents a significant opportunity for organic growth,” Yip said. License sales accounted for just 15% of total revenue in Q2, with maintenance contributing 49%, services 34%, and hardware 2%. CRM was the biggest draw, attracting the biggest share of license sales.
CDC Software’s recent IPO was “a critical milestone in helping the company expand its brand and fund its acquisition and global growth initiatives," said Bruce Cameron, president of the company. Officials said the enterprise software maker “has developed a pipeline of acquisition targets, which it may pursue in the next several quarters.” The company hopes the recently announced buyout of supply chain event management specialist WKD Solutions Ltd. (Categoric) will close in the third quarter of 2009.
"We look forward to working with new investors who are particularly interested in a pure-play software company with a compelling global presence and a scalable platform for growth, both organically and through acquisitions,” Cameron added.
Looking ahead, CDC Software expects 2009 revenue to total $197 million to $200 million, with net income of $15 million to $18 million.