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FT.com / Companies / By region - Autonomy gets credit crisis boost

Autonomy gets credit crisis boost
By Tom Braithwaite

Published: April 24 2008 09:18 | Last updated: April 24 2008 09:18

Autonomy produced record first quarter results on Thursday and announced a “massive deal” with an investment bank as the search software company benefitted from new customers and the subprime crisis.

But shares in the Cambridge-based company fell 66p, or 6.7 per cent, to 924p in early trading - capping a strong run - after the company met analysts’ forecasts but failed to trigger the raft of immediate upgrades that some had expected.

Pre-tax profit in the three months to March 31 rose by 47 per cent to $23.6m on revenue that rose from $65.5m to $105.1m as Autonomy attracted new customers including Barclays Capital and Michelin. Earnings per share increased from $0.07 to $0.10.

Autonomy’s products’ ability to sort through unstructured data from text to phone calls has attracted customers from banks, looking to beef up compliance procedures and prepare for lawsuits related to the credit squeeze, and governments’ intelligence agencies.

“Various sectors shifted spending from general IT to regulatory and litigation-related purchases, making the direct effect of the subprime crisis a net positive for our business,” said Mike Lynch, chief executive. “We have decided to maintain our conservative view on prospects, which we will review if, as expected, current strength continues.”

Mr Lynch also announced a “massive deal” with an unnamed investment banking client related to litigation. He said it was “expected to be one of the most significant contracts Autonomy has won”.

Autonomy flagged that “some customers delay[ed] payments until immediately after quarter end” but said cash collection had since recovered. Cash balances increased by $2.9m from the end of the previous quarter to $95.5m; the company is debt free and Mr Lynch said he would consider returning cash to shareholders with cash of about $100m - “probably the magic number”, he said.

“A solid set of results combined with a cautiously optimistic outlook,” said Derek Brown, analyst at Seymour Pierce.

Copyright The Financial Times Limited 2008