FT.com / Companies / UK - Autonomy up on subprime business lift

FT.com / Companies / UK - Autonomy up on subprime business lift

Autonomy up on subprime business lift
By Maija Palmer in London

Published: January 29 2008 23:55 | Last updated: January 29 2008 23:55

Shares in Autonomy rose 7 per cent after the search software company reported a 62 per cent rise in annual profits and said most of the world’s leading banks were considering using its software to prepare for lawsuits related to the US subprime mortgage crisis.

The Cambridge-based company held firm its forecast for 10-20 per cent growth in 2008 in spite of fears of a global slowdown.

Mike Lynch, chief executive, said: “We have not seen any effects of slowdown yet and even if there is a downturn, we feel comfortable with our estimates.

“We have very little exposure to consumer markets and the financial sector, and 90 per cent of our business is driven by regulatory requirements.”

He said that any slowdownwas likely to be offset by benefits from the subprime crisis, which is creating a new market for Autonomy’s software.

Autonomy’s technology allows companies to sift through unstructuredinformation such as e-mails, Word documents and even telephone call recordings, helping companies prepare for court cases.

Earlier this year, Autonomy signed a $70m (£35m) deal – by far its biggest contract to date – with Citigroup as the bank wrote off more than $18bn in subprime-related losses and braced itself for potential investor lawsuits.

Mr Lynch said: “Every other major bank – barring one or two exceptions – has the same problem and most of the top-name banks are in the process of doing something with us.

“A lot of organisations are having to spend money quickly.”

Revenues for the year to the end of December rose 37 per cent to $343.5m while pre-tax profits rose to $91.4m from $56.3m the previous year, beating analysts’ estimates. Earnings per share rose from 8 cents to 11 cents.

Revenues were boosted by the acquisition of Zantaz, but Autonomy also registered 20 per cent revenue growth for its core IDOL software as it signed deals with companies such as China Mobile, AT&T and Morgan Stanley and organisations such as the US airforce, Nasa and Nato.

Shares in the company, which have gained nearly 57 per cent over the past year, rose 61p to 906p.

FT Comment

● Barbershops and funeral parlours are generally seen as recession-proof businesses, and to this list we could consider adding Autonomy – which is as close to recession-resistant as it gets in the technology sector. Businesses have to be able to find documents amid their ever-increasing mountains of electronic data – this is not discretionary spending – and if they get sued, they have to find them even quicker. Market concerns have taken a little shine off the shares in the past month and left them looking attractive at about 30 times this year’s earnings estimates.
Copyright The Financial Times Limited 2008