In today's Inquirer I write about how SunGard Data Systems, Wayne, is trying to start growing again after four years of lower revenues. Read the story here.
SunGard spokesman George Thomas complains about the way I used CFO Charles Neral's comment, in a meeting with analysts earlier this month. about why revenues are still falling and how long this will continue. Thomas writes: "There was no 'tsunami' of business cancellations. We lost some business due to the 2007/2008 financial industry collapse due in part to clients which went bankrupt or were acquired by other firms, or some clients which chose not to renew with us several years ago and are just now rolling off our systems now (due to the mission critical nature of our solutions).
"Charles used the word “tsunami” to help the analysts understand the nature of our recurring revenue flow and when we expect to turn. His message is that revenue will come back over time in an increased annuity flow (like a tsunami flow, not a light switch), which will give analysts quarters of lead time to see the change occurring."
Here is SunGard's transcript of Neral's remarks:
CHARLES: Let me add one comment. You know, this business is 70 percent to 80 percent annuity. And so there's not a switch that's going to flip. This is more like a tsunami. Once the reductions, the legacy reductions which we've seen begin to mitigate and they do mitigate in the future because there's a list of them and you can see with good visibility how they will trend off. You then need to think about the fact that less transaction, as Russ said, more managed services. The managed services come on as an annuity flow. In availability services, the new offering comes on as annuity flow. That revenue is very, very predictable. And so we have great visibility that even in times like this when we can see that the revenue may be down a little bit, we can manage per profit, you saw us do that. We can look forward to the sales investments we're making, the new products we're bringing to market, and we know that we'll turn, I will turn the revenue up but it will come on as an annuity flow. So you'll have quarters of lead time to see the change occurring. And as Russ said, you know, we expect some of the downdraft to be less so next year.