Monday, April 9, 2012

South Carolina software company soon to be Canadian

Did anyone know that South Carolina was home to a $55 million-dollar education software company called Computer Software Innovations?

I didn't.

According to the media in Ottawa, Ontario, Canada, it's about to be gobbled up by a much larger Canadian software company called Constellation Software.

Where's Governor Nikki Haley? Isn't she the self-appointed protector of South Carolina jobs?

If we lose this heretofore-unknown high-tech company to Canada -- of all nations -- how many jobs is that going to cost us?

O, no. I foresee a double-dip recession. We're about to see our unemployment number rise again, just as Haley finishes her triumphant book tour of Manhattan and The 700 Club.

Here's the news with the gory details, from the Ottawa Citizen -- because apparently no media outlet in South Carolina knew we were home to a software company, either.

Constellation Software, the booming Toronto company with a big Ottawa operation, has launched a hostile takeover bid for a South Carolina education system software company. The $13-million bid is unusual because Constellation has grown quickly with a string of much smaller and usually friendly acquisitions of other public-sector software companies.

Computer Software Innovations, however, is an inviting target, with strong potential but problems that need fixing and will likely depress the price.

Sales rose five per cent to $55.1 million in 2011 but profits were cut in half to just $243,000 on higher selling costs. It supplies school boards and local governments across the U.S. southeast.

Constellation has the weapons for a battle. It has doubled available credit to $300 million to help drive an aggressive acquisition strategy. Constellation is a hot stock, soaring 30 per cent so far this year. After flirting with the $100 mark, the stock slipped back to the $88 range.

The latest Constellation results provide little reason for worry for investors despite a rough patch last fall. Sales of a public sector software group, which supplies municipalities, utilities and school boards, rose 13 per cent to $144.6 million in the December quarter.

A smaller private sector software group grew even faster and overall profits surged a sparkling 72 per cent. Twenty acquisitions during 2011 were a big factor driving growth.

Organic gains, which excludes the impact of the takeovers, rose a robust seven per cent. The Ottawa-based Harris Operating Group was a significant performer, contributing $4 million of the $9 million in organic sales growth in the quarter. Constellation continues to snap up small companies, including three deals for about $8 million this year.

However, it cautioned that the pace of growth this year could be slower because the acquired base of new companies grew slower than in previous years.

Apparently, when you gobble up too many smaller companies too fast, you get indigestion.

By the way, did you catch Pat's dig at Bamberg, and Haley's agreement with his question?

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