VAR Financials: Defense Segment Up, Others Mixed3:21 PM EST Fri. Jan. 23, 2009
Defense IT solution providers seem to have fared better last year than other types of VARs, based on early earnings reports. Of the handful of VARBusiness 500 solution providers releasing financials this week, Lockheed Martin and Teledyne were winners, Agilysys was a loser and iGate saw mixed results.
Lockheed Martin and Teledyne saw both overall revenues and division revenues rise in 2008. It's likely their success is due to defense customers planning their budgets well in advance and also because they started turning to channel partners for cost-cutting and productivity-enhancing solutions earlier than other types of customers.
Those with customers in retail and travel -- areas which have been significantly impacted by the recession -- such as Agilysys, did not fare as well. Finally, outsourcers such as iGate may be feeling the pinch as customers cut back on buying services as their own sales drop.
Agilysys' (2008 VARBusiness 500 rank 68) reported its second quarter 2009 revenue fell 11.3 percent to $171.44 million from $193.27 million in the prior year's quarter. Sales were lower across all the solution provider's segments, which include the Hospitality Solution Group, the Retail Solutions Group and the Technology Solutions Group.
HSG revenue slipped slightly to $23.49 million from $23.64 million, because of lower sales of its legacy property management software compared with the year-ago quarter. RSG revenue decreased 11.7 percent to $29.44 million from $33.34 million, while revenue from TSG dipped 13.4 percent to $120.05 million from $138.57 million a year ago. According to Agilysys, the decline in both the segments' revenue was related to lower hardware sales volume due to the current drop-off in demand for IT products.
The global IT outsourcing firm reported that 2008 revenue increased year over year, but fourth quarter sales were down from the third quarter.
Quarterly revenue at iGate (2008 VARBusiness 500 rank 144) was $51.5 million, compared with $53.6 million made in the corresponding 2007 quarter. However, the annual figures were up: Revenue was $218.8 million compared with $201.7 million in the previous year.
Twenty-seven new customers were added during 2008, including eight in the last quarter. CEO Phaneesh Murthy said he expects the business environment to remain volatile during the next two quarters, but noted that solutions that emphasize cost-cutting should remain solid. iGate also this week declared its first annual cash dividend, which will be 11 cents per share.
The nation's largest defense contractor reported an increase in overall revenue and profits in 2008. Its solution provider group, Information Systems & Global Services (IS&GS), posted growth as well.
For the fourth quarter ended Dec. 31, 2008, IS&GS (2008 VARBusiness 500 rank 7) reported $3.3 billion in sales, compared with $2.8 billion in the year-prior period. For the year, the division reported $11.6 billion in sales, up from $10.2 billion in 2007. One of the principal drivers for the uptick in Information Systems was the increased sales in enterprise solutions and services activities.
Teledyne Technology (2008 VARBusiness 500 rank 142) reported fourth quarter 2008 sales of $467.1 million, compared with sales of $427.5 million for the same period of 2007. Year-over-year revenue was up too: Sales for 2008 were $1,895.3 million, compared with $1,622.3 million for 2007.
The company breaks down revenue for each of its four segments. Teledyne Solutions is the company's solutions integration arm and is part of the Engineered Systems segment. Engineered Systems' fourth quarter 2008 sales were $85.6 million, compared with $78.3 million for 2007, an increase of 9.3 percent. Compared to 2007 overall, the Engineered Systems segment did well, reporting $362.7 million in revenue -- growth of 20.2 percent.