SunGard Q2 revenues edge up; net income hit hard

Source: SunGard

SunGard, a global leader in integrated software and processing solutions and the pioneer and leading provider of information availability services, reported today that revenue for the three months ended June 30, 2006 was $1.1 billion, an increase of 6% over revenue for the three months ended June 30, 2005. Revenue from software license fees in the quarter was $63 million, an increase of $4 million from the second quarter of 2005. Internal revenue (revenue from businesses owned for at least one year and further adjusted for the effects of businesses sold in the previous twelve months) grew 5% for the quarter compared to the same period in 2005.

Adjusted income from operations (defined in Note 1 to the Notes to the Consolidated Condensed Financial Information) for the three months ended June 30, 2006 was $240 million, compared to $226 million in the same period in 2005.

Reported income from operations for the three months ended June 30, 2006 was $123 million and includes amortization of acquired intangible assets of $102 million, stock-based compensation, purchase accounting adjustments and other expenses of $14 million and merger costs of $1 million. For the three months ended June 30, 2005, reported income from operations was $177 million and included amortization of acquired intangible assets of $35 million and merger costs of $14 million.

For the three months ended June 30, 2006, adjusted EBITDA (defined in Note 2 to the Notes to the Consolidated Condensed Financial Information) was $304 million compared to $292 million for the three months ended June 30, 2005.

Cristobal Conde, president and chief executive officer, commented, "SunGard's performance in the quarter was solid. Our technology leadership is very strong and is reflected by the awards that we have garnered recently including highest customer satisfaction rating for FRONT ARENA from Kimsey's UK Dealing Room Survey, best order management system for BRASS and best streaming data management for PowerData both from Waters, and highest traction index for iWORKS from Celent Communications. Our Common Services Architecture (CSA) strategy has been very well received by customers and partners. We also received very positive feedback on our MiFID initiatives from the nearly 1,000 attendees at SunGard Europa, our European customer conference held in Barcelona in June. Our competitiveness remains very strong."

Reported revenue for the first six months of 2006 increased 6% over the same period in 2005 to $2.1 billion. Adjusted income from operations for the six months ended June 30, 2006 was $442 million compared to $431 million last year. Reported income from operations for the six months ended June 30, 2006 was $212 million and includes amortization of acquired intangible assets of $198 million, stock-based compensation, purchase accounting adjustments and other expenses of $29 million and merger costs of $3 million. In the first six months of 2005, reported income from operations was $333 million and included amortization of acquired intangible assets of $69 million, merger costs of $18 million and a one-time charge of $11 million related to the relocation of an availability services facility.

Financial Systems revenue increased 6% to $500 million for the quarter. Internal revenue grew approximately 4%. License fees were $40 million for the quarter, an increase of $1 million from the second quarter of 2005.

Notable deals in the quarter included:

-- A leading provider of wealth management, custody and brokerage services to financial intermediaries signed an exclusive agreement to integrate its brokerage services with the transaction processing capabilities of the SunGard Transaction Network (STN).

-- A leading provider of retirement services signed a multi-million dollar contract for professional services for the implementation of SunGard's Omni retirement plan administration solution.

-- One of the world's leading financial management and advisory companies selected SunGard's Martini for securities financing and lending.

Higher Education & Public Sector Systems revenue increased 6% to $227 million for the quarter due to internal revenue growth. License fees were $21 million for the quarter, an increase of $2 million from the second quarter of 2005.

Notable deals in the quarter included:

-- Two institutions in Illinois, a comprehensive public university and a private, Ph.D.-granting institution, chose SunGard Higher Education to build new digital campuses.

-- A large state system in the southeastern U.S. is extending its existing relationship with SunGard Higher Education by choosing Banner Finance and HR administrative products.

-- A city in Florida purchased SunGard's HTE OSSI public safety solutions and related services including computer-aided dispatch, records management and crimes analysis modules.

Availability Services revenue increased 5% to $337 million for the quarter. Internal revenue increased approximately 6%, reflecting the effect of the disposition of a UK-based value-added reseller.

Notable deals in the quarter include:

-- A private, non-sectarian research university with ten schools and colleges, selected SunGard Availability Services for traditional disaster recovery and managed services.

-- A large integrated health network selected SunGard Availability Services for traditional disaster recovery services.

-- A leading global IT services and product engineering company selected SunGard Availability Services for managed services.

At June 30, 2006, total debt was $7.44 billion and cash balances were $260 million. Capital expenditures were $144 million company-wide for the six months ended June 30, 2006.

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