Icahn Discloses Stake in Lawson Software

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Activist shareholder Carl Icahn has disclosed an 8.54% stake in Lawson Software (LWSN), a developer of business applications.

While many of the Corporate Raiders of the 1980s have faded away, Icahn, at the age of 74, continues to be quite active. Some of his recent shareholder-activist moves include Lions Gate Entertainment (LGF) and Genzyme (GENZ). Despite his billions in wealth, Icahn still loves deal-making -- and yes, making more and more money. He wants to talk to Lawson management, which is definitely a sign he wants action on the stock price.

Lawson's stock price is actually down 2% to $7.97 Tuesday morning, after climbing 7.7% Monday -- but of course, the stock market is having a tough day anyway (so far the Dow is off 1.8%).

Software for Streamlining Business Processes


Founded in 1975, Lawson is one of the pioneers of the enterprise resource planning (ERP) software market. Essentially, the company's software helps with human resources, payroll, accounting, supply chain, business intelligence and so on. Such technology is critical to customers and often means long-term relationships. Thus, for a company like Lawson, the result is recurring maintenance income, which is at high margins.

Lawson's software is focused on middle-market customers and its industry footprint is broad. Some of the verticals include equipment service management and rental, fashion, food and beverage, and manufacturing and distribution. Lawson has more than 4,500 customers across 41 countries.

Perhaps the biggest opportunity is in health care. Last year, Lawson acquired Healthvision for $160 million. The company provides integration and application technologies to hospitals and large health-care organizations. No doubt, this is a growth market and has proven resilient during the recession.

But as a whole, Lawson's performance has been somewhat lackluster. During the past nine months, the company saw a 5.6% fall in revenues to $571.1 million. But the company was still able to increase software revenues by 9.2% or $10.2 million.

Buyout?

The business software market has been the subject of much consolidation over the years. In 2005, Oracle (ORCL) purchased PeopleSoft. From there, the company acquired 50 more software companies, including Retek, Siebel Systems, Hyperion Solutions, BEA Systems and Sun Micro Systems. Of course, IBM (IBM) has also been active and even SAP (SAP) has been revving things up lately.

As for Lawson, it believes that the consolidation has been a benefit. After all, customers now have fewer choices, so why not try an alternative like Lawson?

Yet, the fact remains that as Lawson's competitors get larger, it gets tougher to compete. At the same time, cloud-based operators like NetSuite (N) are also making headway. So ultimately, the best alternative for shareholders may be for Lawson to sell out to Oracle, IBM or SAP. And now with Icahn as a major investor, this could be on the fast-track.
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