Event
Summary
Mercator Software, formerly known as TSI International Software, missed
their earnings estimate by 4 cents a share (predictions were 8 cents a
share), and dropped 54 percent in value in early market trading. Latest
estimates showed the stock at $24.75, which is a 60.5 percent drop from
their prior market capitalization. The company reported higher than forecasted
marketing expenses, and the fact that Ira Gerard, the CFO, was stepping
down due to health reasons. Kevin McKay, former chief executive officer
of SAP America, will take over as executive vice president, CFO, secretary,
and treasurer.
Mercator
is attempting to put a positive light on the change in management. According
to Connie Galley, president and chief executive officer of Mercator, "I
am extremely pleased to welcome Kevin as a key member of the Mercator
management team. Kevin's experience in guiding an elite software company
through a period of unprecedented growth could not be a better fit for
us as we move to the next level. His leadership of critical operational
areas of our business will help us build the infrastructure needed for
accelerated growth. I look forward to working with Kevin to fully exploit
Mercator's significant opportunities." McKay also spearheaded many of
SAP's strategic long term planning efforts, including SAP America's expansion
plans, mergers and acquisitions, and the launch of mySAP.com.
Market
Impact
Despite Mercator's sharp drop in market capitalization, their capabilities
in the areas of XML and enterprise application integration are still solid.
The market has strongly penalized many software companies recently for
missing the so-called market "whisper number". Victims recently have included
Computer Associates, BMC Software, Compuware, Brio, Applix, and MicroStrategy.
Most are expected to recover in at least the mid-term. Especially on the
NASDAQ market, investors have been exceptionally skittish, but the fundamental
value of the firms and their products remains the same.
User
Recommendations
Companies looking at Enterprise Application Integration products should
still include Mercator on a long list of vendors to be considered. However,
it would be wise to keep an eye on where their stock evaluation goes in
the near to mid-term, since their capitalization will effect how they
can fund research and development efforts going forward. In addition,
an insufficient market capitalization can make Mercator subject to a buy-out
by another software firm, which could put their product development plans
in turmoil.