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Date Posted: 3/23/2011

Is Lawson Software Selling?

According to Reuters, Lawson Software (NasdaqGS: LWSN - News) is exploring possibilities of selling its software business. The rumors of the sale led to a 13.26% surge in the stock price on March 8, 2011, which closed at $11.19. The stock further gained 0.27% in after market trading.

Lawson has hired Barclays Capital, a division of Barclays PLC (NYSE: BCS - News) to explore strategic alternatives for the same. The company is also contemplating retaining its existing business and strengthening it by further acquisitions.

In 2010, Lawson acquired Healthvision Solutions Inc. for $160 million. Based in Dallas, Healthvision is a privately-held company providing integration and application technology and related services to hospitals and large healthcare organizations.

Most recently, Lawson completed its acquisition of privately held Enwisen for $70 million. California-based Enwisen is a leading software-as-a-service provider of human resource (HR) service delivery solutions to over 260 customers.

Lawson Software competes primarily in two verticals – health care and retail – which are among the fastest-growing segments of the enterprise resource planning (ERP) market. Lawson operates in a highly competitive market dominated by large players such as Oracle Corporation (NasdaqGS: ORCL - News) and SAP AG (NYSE: SAP - News) in health care, and JDA Software (NasdaqGS: JDAS - News), SAP and others in retail.

Oracle has been the most active in this industry, acquiring approximately 50 companies since 2005. Oracle recently acquired Sun Microsystems Inc. SAP AG acquired Business Objects S.A. in 2008 and recently acquired Sybase Inc. Of late, even Infor Global Solutions is gaining traction and has become a large global competitor through acquisitions (SSA Global in July 2006) of several enterprise software companies.

According to sources, big wigs like Oracle, SAP, Hewlett-Packard Co (NYSE: HPQ - News), International Business Machines Corp (NYSE: IBM - News) and Microsoft Corp (NasdaqGS: MSFT - News) might be interested in buying Lawson.

In addition, sources stated that private equity firms could also be targeting Lawson, drawn by the company’s stable cash flows. Lawson ended the second quarter of fiscal 2011 with cash and equivalents of $288.3 million.

We currently maintain a Neutral recommendation on the stock supported by a Zacks #3 Rank.


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