Mercator narrows losses, loses revenue

Mercator narrows losses, loses revenue

Middleware vendor Mercator blames the recent proxy battle with Strategic Software Holdings, war and a weakening economy on a 27% slide in first quarter license sales, as prospective customers deferred spending decisions.

Total revenue for the first quarter ended 31 March, 2003 is $23 million, compared to $27.4 million in the first quarter a year ago, including license revenue of $7 million, which is down 27% compared to license revenue of $9.5 million in Q1 2002. The company notes that maintenance revenue of $10.4 million in the first quarter is up five percent, compared to $9.9 million in the first quarter of 2002.

Net losses for the quarter narrowed by 30% to $4.3 million from $6.1 million a year ago as the company cut $5.6 million from operating expenses. The net loss included a $0.3 million charge relating to fourth quarter restructuring efforts.

Additionally, Mercator says it incurred $150,000 of expenses in Q1 as it fended off an unsolicited bid for the company from Strategic Software Holdings. The vendor reached an agreement with SSH over the Easter holiday period terminating an earlier proxy contest and proposal to install an alternative slate of directors to the board.

Under the settlement terms, Rodney Bienvenu of SSH has been appointed a special advisor on strategic matters for which he will pocket $1500 for each presentation to the Mercator board. Mercator additionally agreed to reimburse SSH $300,000 for expenses related to the proxy contest and SSH has agreed that it will not initiate another proxy contest or make an unsolicited offer for the company until at least 15 January, 2004.

The company expects to record a charge of approximately $550,000 in the second quarter relating to the settlement

Roy King, Mercator chairman and CEO says that the battle with SSH caused a number of customers to defer their purchasing decisions at the end of the first quarter.

"Combined with a weak economy and the war in Iraq, the proxy matter played a significant role in a number of customers' decisions to defer their purchases," he says. "Now that the proxy matter is behind us, we are focused exclusively on serving our customers and partners, and executing our strategy to deliver value to all Mercator stakeholders."

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