Misys Plc has reported an impressive 183% increase in profits to UKP5.14m, on turnover up by 352% to UKP38.5m (CI No 1,351), only to see a its share price fall by 27 pence to 343 pence. The company says that organic growth accounts for 20% of revenue, and the rest came from acquisitions made in June and July last year, which may account for the City’s cautious response to the figures. Misys’ recent acquisitions reflect its conviction that the future belongs to open systems. It bought TIS Ltd for UKP26.5m, shortly followed by Mentor System Plc, which cost UKP12.1m. Team Systems Group was the next item on Misys’ shopping list, and then Enterprise Business Systems, at UKP10m and UKP1.6m respectively. TIS Ltd was established in 1982 as a distributor of Unix-based systems. It distributes for Unisys and MIPS Computer Systems Inc, and markets Multisoft software. TIS Maintenance is the sister company, providing hardware and software support for TIS clients and value-added resellers. Mentor Systems Plc has been developing applications software since 1978. It decided to adhere to Open System standards in 1984, and all subsequent developments have been able to run under Unix. The third acquisition, Team Systems Ltd, supplies office automation and general accounting packages. Like TIS and Mentor, it is committed to Unix, and its packages include Altos-based offerings from Tetra and Multisoft. Enterprise Business Systems supplies integrated manufacturing systems, and its flagship product, EMS, runs on DEC’s VAX, MicroVAX and Unix ranges.
Predictable profits
Misys has grown rapidly under the direction of ex-Hanson man Kevin Lomax, who resents the company being described as a conglomerate, and describes his management strategy as being true to the Hanson-style (CI No 1,120). Lomax only acquires when a company has an established track record, strong evidence of market penetration, and the prospect of high and predictable profits. He reckons that this minimises dependancy on product cycles and proprietary technology. Furthermore, head office has no operational involvement in the activities of group members, and operating subsidiaries are responsible for their own profitability and growth. Lomax believes that open systems have arrived, and companies that don’t operate in that environment are not going to survive. 60% of Misys’ revenue comes from open system, and Lomax forecasts extremely rapid industry changes will push that figure even higher. Misys is so sure of the open systems tidal wave that it is targeting IBM’s System 36 users as a significant potential market. It believes IBM has accepted that System 36 users don’t want to take the AS/400 route, and that IBM intends to migrate them to the forthcoming Rios Unix machines. Consequently, Misys says it will be ready to exploit the new IBM AIX box when it’s ready to ship in July of this year. The fact that System 36 users have little reason to thank IBM for the AS/400, or its reluctant adoption of Unix for commercial purposes, doesn’t perturb Misys. The company says that the combination of loyalty and a great deal of user inertia will ensure the success of IBM’s Unix offerings. And even if System 36 users were to abandon IBM and switch to committed Unix players, Misys claims it can meet their demands because of its relationships with the major Unix suppliers. Despite certain reservations on the short term future of the UK economy, Lomax is still hungry to make further acquisitions, and he regards the US market as of increasing interest.
