After last years buyout of Scala Business Solutions, ERP and supply-chain vendor Epicor Software Corp. is now giving serious thought to more acquisitions, especially in vertical markets, said Epicor president and CEO George Klaus.
Completed during the first half of 2004, Epicors purchase of Scala has turned out to be “a very, very good acquisition [that] exceeded all our expectations,” Klaus said this week, in remarks delivered at the Needham Growth Conference in New York.
“It allowed us to become a truly global company,” Klaus said. “We are looking at acquiring other companies, too.”
No specific acquisitions are imminent right now, but Epicor has its eyes peeled for possible purchases in vertical markets, Klaus told investors at the conference.
Initially founded about two decades ago as Platinum Software, and publicly traded since 1992, Epicor has enjoyed consistent growth over the past several quarters.
For the third quarter of 2004 ended Sept. 30, Epicor reported total revenues of $62.2 million—including $17.5 million from its new Scala subsidiary—compared with $40.3 million in total revenues for the third quarter of 2003. Financial results for the fourth quarter of 2004 will be announced Jan. 26.
Epicors buyout of Scala cost the vendor a total of about $87 million in cash and Epicor stock.
In his talk at the Needham conference this week, Klaus said Epicor has about $50 million in cash on hand. He attributed Epicors turnaround largely to a decision to put more focus on vertical markets.
Epicor has 6,500 customers in the manufacturing space, and 4,500 of them are due for software upgrades, he said.
Now that the 8.0 edition of Epicors Vantage manufacturing software is ready, Klaus said he envisions average revenues of $40,000 from each customer migration to the new platform. The product is built on a Microsoft .Net architecture.
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Klaus also touched on some recent contract wins, particularly within hospitality and other professional service vertical markets. Epicor recently expanded on its longtime relationship with Hyatt International, for instance. Epicor now has a total of about 20,000 customers worldwide, he said.
Epicor produces three software products in the general ERP (enterprise resource planning)/CRM (customer relationship management)/SCM (supply chain management) space: Vantage; Epicor Enterprise; and iScala, a product inherited through the Scala acquisition.
Klaus said that as he sees it, the biggest benefits of the Scala buyout include the heavily internationalized iScala product, along with Scalas global distribution channels.
All together, Epicor now has distribution in 143 of the roughly 200 countries in the world. In contrast, SAPs software is distributed in 132 countries, the investors were told.
Epicor still needs distribution in China, and the company would consider acquiring a distributor there, according to the CEO.
But for the most part, Epicor is leaning toward using additional acquisitions to gain toeholds in more vertical markets.
“We are not looking at technology companies per se,” Klaus said. “We would have to acquire somebody with expertise in pharmaceuticals or government or something like that.”
Epicor has previously articulated a strategy of combining acquisitions with organic growth.
Other acquisitions by Epicor have included buys of SRM (supplier relationship management) vendor Clarus for $1 million in 2002 and of manufacturing software specialist ROI Systems for $20.7 million in 2003.
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