Losing Magic at Magic Software
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[Or Yehuda, ISRAEL] Magic Software Enterprises (MGIC) said fourth quarter revenue and earnings will be below the company's previous expectations, and its top executives will step down.
Revenues are expected to be approximately $23 million, with an estimated net loss of $6 million. The company said half of the costs will come from non-recurring restructuring charges as the company moves into new lines of business and its top executives leave.
Magic chief executive Jack Dunietz and president Israel Teiblum will leave the company at the end of this year. Magic Chairman Dan Goldstein will become CEO.
The changes are being factored into fourth quarter restructuring charges. The company said it will provide details of the restructuring charges when it announces fourth quarter results in early February.
The company said the lower expectations represent the current economic outlook, as well as the slowdown in corporate IT spending.
"Like many other technology companies, the current weakness in worldwide economic conditions, coupled with a slowdown in corporate IT spending, has had a negative impact on Magic's results," Goldstein said. "Many deals have been postponed until 2001 while companies reassess their own spending in light of the current market. We are quite confident that these deals will be realized in the coming quarters."
Goldstein said in his statement that because solutions carry higher price tags, companies often will prolong the decision-making process until they have explored and exhausted every available option.
"This can move the purchase decision from one quarter to the next," he said. "The mere fact that these are more considered decisions means that, if even one deal is lost or delayed, there is very little room to replace it with other business during any single quarter."
Still, the company said, it remains confident that its long-term outlook is favorable. According to Magic, it has been receiving positive reviews from customers for its new product releases and is making significant progress in restructuring its management. The company has appointed new corporate vice presidents for sales and professional services.
Magic, part-owned by Israel-based Formula Group (FORTY), develops, markets and supports software development and deployment technology that enables enterprises to accelerate the process of building and deploying applications that can be rapidly customized and integrated with existing systems. The company's North American subsidiary is in Irvine, Calif.
Parent company Formula is an information technology holding company. See our previous story about Magic Software. Click here.