PhillyDeals: SunGard's $1 billion writedown not conference-call fodder

SunGard wrote down more than $1 billion in corporate value Monday night, leaving the Wayne software and data-recovery company with big losses on the delayed financial reports it finally posted for 2009.

The market didn't flinch; privately held SunGard's bonds kept trading at premium prices.

How can $1 billion vanish so quietly?

It's just accounting: When SunGard was purchased for $11 billion by a group of private buyout firms in 2005, the price included billions in "goodwill."

That's the difference between what a company's assets and sales would appear to justify, and what enthusiastic buyers are willing to pay, in hopes of future profits.

But after the business decline of the past couple of years, investors are used to seeing fantastic goodwill reserves cut at least part way to Earth, as SunGard has now done. It cited "a reduction in the revenue growth outlook" for Availability Services, SunGard's data disaster-recovery business.

The bond buyers and software analysts who crowded the company's conference call yesterday didn't ask about the missing $1 billion.

Instead, they pestered Cristobal Conde, the chief executive officer, to tell them when he's going to cough up some of the company's cash flow, which has been increasing as SunGard cuts costs, despite lower sales in three of its four business units.

Conde said he'd rather put that money into buying other firms. "I find the returns on mergers and acquisitions to be superior to the returns on a dividend," said Conde, who on March 11 bought Irish "cloud computing" and data-services manager Hosting365 for a price he wouldn't disclose.

"We live and hope that the M&A climate will change so we will be able to buy decent businesses at good prices," he added.

If asset prices are high, why not sell all of SunGard? That was the question of JPMorgan analyst Thomas Egan.

"It's no secret we talk about it all the time," said Conde. His owners are buyout funds, and buyout funds are always looking to get paid.

But nobody's offering what SunGard's worth, Conde added. "There's too much [price] compression."

Other companies are too expensive, but SunGard is too cheap? "That's one of our frustrations," Conde explained. "Good companies and bad companies all trade at high multiples. There's insufficient distinction between the good and the bad."

He's not predicting that sales for the software sector are going to turn around soon. "I don't see too many [companies] with pricing power," Conde said. "Those are not the early indicators of a very strong recovery."

"We're running this business as though we expect to own it for a long time," he told me later. Still, "We could change our mind very quickly. It's our job to be very flexible."

Promedior Inc., of Malvern, says it has raised $12 million from Dutch investor Forbion Capital Partners, and from previous U.S. investors, for Phase 2 clinical trials of its human protein drug candidate PRM-151. It intends to fight eye, lung, and kidney inflammation and scarring.

That sum comes on top of $15 million its U.S. investors pumped in last year.

PRM-151 "is a recombinant form of a naturally occurring protein" found in blood, Dominick C. Colangelo told me. Rice University scientists Richard Gomer and Darrell Pilling studied its anti-inflammatory effects in the early 2000s. They're now on Promedior's advisory board, working at Rice rival Texas A&M, and waiting to cash in.

J&B Software, the Blue Bell-based, 400-worker payment-software company that has been owned by India's 3i Infotech since 2007, says it is offering clients a version of Mitek Systems' Mobile Deposit service, which allows customers to deposit checks via smartphone cameras.

The new service is targeted to bank and brokerage officers, who may use it to download checks without having to waste time at branches.

It's another step toward reducing the familiar business world of bricks, desks and parking lots to algorithms and wireless signals.