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February 5, 1987

STAKE BEING BUILT? CULLINET CAN’T EXPLAIN CHURNING IN ITS SHARES

By CBR Staff Writer

Cullinet Software Inc, Westwood, Massachusetts, has noted unusual activity in its shares, but the company can see no business explanation for the surge in volume and price of its shares which suggests that a predator may be quietly building a stake, although some very bombed-out technology stocks have been star performers in Wall Street’s raging bull market. Chief executive David Chapman comments Our third quarter ended on January 31, and, while we expect an increase of over 20% in sales compared with the second quarter, we will nonetheless report a loss, as we have previously indicated. Although revenue from new products and fiscal 1987 acquisitions comprised about 10% of third quarter sales, we are still six to nine months away from seeing substantial returns on these investments. During the last six months, Cullinet has bought assets from Esvel Inc, Computer Strategies Inc, Applied Development Corp, and, most recently, Planning Control International. The acquisitions, as well as a series of investments in new product technology, are aimed at diversifying Cullinet from its previous dependence on mainframes, and extending its markets to mini and personal computers. For the upcoming fourth quarter to April 30, adds Chapman, we expect a further sequential increase in sales over the third quarter but while our internal objective is to break even for the fourth quarter, we continue to be faced with a lumpy and uncertain market. Cullinet posted losses in its first and second quarters and, will show a first-time-ever loss for the fiscal year to April 30.

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