Legent Corp., the largest computer software company in theWashington area, is reinventing itself.
In response to shifts in the market, Legent is making thetransition from helping other companies manage IBM mainframe computersystems to providing products and services that cut across all typesof personal computer and mainframe networks.
Over the past three months, Legent has made several acquisitionsdesigned to support that transition.
The company has taken over two software providers - CorporateMicrosystems Inc. in Lebanon, N.H., and Performance Technologies Inc.in Boston - and signed a letter of intent to acquire Networx Inc., adeveloper of trouble-shooting software in Bellevue, Wash.
All of the purchases aim to give Legent a wider variety ofproducts.
Legent also recently increased its sales staff and reorganizeditself into seven business divisions designed to make the companymore responsive to the market.
But analysts say it will take time for Legent's new strategy,acquisitions and technologies to boost earnings.
"It takes more than a quarter to implement change of thismagnitude," said J. Neil Weintraut, an analyst with Hambrech & Quistin San Francisco.
Legent reported disappointing results for the third quarter endedJune 30. Profit for the quarter was $9.4 million (26 cents pershare), down 28 percent from $12.9 million (38 cents) a year earlier.
Legent, with more than 2,400 employees, develops and marketssystems software, the coded instructions that are designed to helpcompanies manage their computer systems.
The company used to focus on developing software to make IBMmainframe computers run more efficiently.
But in recent years, Legent has expanded its product line toinclude more software that manages networks of personal computers aswell as mainframes.
Legent has invested $50 million over the past three years inacquisitions, technology licensing agreements and alliances withother companies, producing a family of technologies called XPE, whichstands for "cross-platform environment."
According to John Burton, president and chief executive of Legent,the shift to this new group of technologies can be likened to anautomobile manufacturer building a radically new chassis to transformits machines.
Software magazine recently ranked Legent eighth among the topindependent software vendors. Giant Microsoft Corp. leads the field,followed by Computer Associates International Inc. in Islandia, N.Y.,which is Legent's toughest competitor.
Legent is positioned to become one of the world's top independentsoftware suppliers, said Burton, who last month announced the XPEstrategy.
"The strategy is a good move on their part," said Timothy R.McCollum, a stock analyst with Dean Witter Reynolds in New York.
McCollum said that if fully implemented, XPE would give Legent amore comprehensive approach than any other software company tointegrating various computer systems.
Piecing Together the Puzzle
Robert Knepp, general manager of Shared Service Center, which runsinformation systems for two Blue Cross health plans in Harrisburg,Pa., said that many software users face "an integration nightmare"tying various pieces of software together.
"Legent has looked at the whole puzzle," said Knepp, who is aLegent customer. "Their concept is ahead of the others."
In the meantime, Legent's top competitor, the large and highlyprofitable Computer Associates, has not been standing still.
CA, which is a leader in research and development spending, hasdeveloped products to create "interoperability" among computersystems.
One analyst said that while Legent's XPE concept may be broaderthan any other, Legent is behind CA in actually turning out softwareproducts for so-called distributed systems management.
Legent's stock plummeted 36 percent in mid-July, a day after itannounced that its third-quarter earnings would fall far short ofanalysts' estimates: On July 13, the stock fell $10.12 1/2 to $17.75in trading on Nasdaq's national market system.
The stock has since regained some ground, closing Friday at$24.25.
However, earnings for fiscal 1993 and the fourth ended Sept. 30,to be announced today, are expected to be relatively flat, analystssay.
Weintraut predicts about a 9 percent sales increase for Legent inits 1994 fiscal year, which analysts would consider unimpressive in agrowth industry such as this one.
Legent had revenue of $426.7 million in 1992, a 23 percentincrease over the year before.
Playing to Legent's Strengths
According to Weintraut, Legent must build on two strengths: a goodreputation among its customers and a record of retaining andskillfully using the personnel and assets of the companies itacquires.
Legent was formed in March 1989 through a merger of Vienna-basedMorino Associates and Duquesne Systems of Pittsburgh, a mainframesoftware company nearly equal in size.
In 1992, Legent acquired a systems software rival almost half itssize, Goal Systems International in Columbus, Ohio.
The Legent-Goal merger strengthened Legent's ability to providemore products but it also created problems combining different salesstaffs, Legent officials say.
As Burton explains it, Legent had focused its sales staff on large-scale strategic deals while shifting attention away from the smallersales that have in the past provided the company's bread-and-butterincome.
In recent weeks, Legent has built up its sales staff, aiming for amix of sales managers who can represent all of Legent's products toits major customers and others who can take product specialities tosmaller customers.
Legent has added 54 employees, including specialists in non-mainframe software, to its North American sales staff since July,raising the total staff to more than 160.
The company removed a layer of management from the sales staff andgave more decision-making power to salespeople in the field,according to Bill Drummey, executive vice president for NorthAmerican sales.
In September, Legent and Hewlett-Packard Co., one of the nation'slargest computer companies, agreed to jointly develop, market andsell software that will link traditional mainframe data centers withdiverse "distributed computing" systems.
Fight for Survival
In a highly competitive field, in which some companies will notsurvive, Burton has said his goal has been to "acquire or beacquired."
Three years ago, Robert Yellin, Legent's chief technology officer,laid out a blueprint, called a "distributed systems managementstrategy," to make sure acquisitions and technologies fit together.
"It's better to be the hunter than the prey," said Yellin,referring to Legent's drive to take over smaller companies.
Yellin, who learned juggling a few years ago, likes to take abreak occasionally to toss small plastic balls in the air.
A company and a juggler face similar problems, according toYellin. The trick, he said, is to acquire young, rapidly growingentrepreneurial companies at their peak and then keep them moving.And Legent now has to keep more balls up in the air than mostsoftware companies.
Legent Philosophy: `Acquire or Be Acquired'
Legent Corp., the largest computer software company in theWashington area, is reinventing itself.
In response to shifts in the market, Legent is making thetransition from helping other companies manage IBM mainframe computersystems to providing products and services that cut across all typesof personal computer and mainframe networks.
Over the past three months, Legent has made several acquisitionsdesigned to support that transition.
The company has taken over two software providers - CorporateMicrosystems Inc. in Lebanon, N.H., and Performance Technologies Inc.in Boston - and signed a letter of intent to acquire Networx Inc., adeveloper of trouble-shooting software in Bellevue, Wash.
All of the purchases aim to give Legent a wider variety ofproducts.
Legent also recently increased its sales staff and reorganizeditself into seven business divisions designed to make the companymore responsive to the market.
But analysts say it will take time for Legent's new strategy,acquisitions and technologies to boost earnings.
"It takes more than a quarter to implement change of thismagnitude," said J. Neil Weintraut, an analyst with Hambrech & Quistin San Francisco.
Legent reported disappointing results for the third quarter endedJune 30. Profit for the quarter was $9.4 million (26 cents pershare), down 28 percent from $12.9 million (38 cents) a year earlier.
Legent, with more than 2,400 employees, develops and marketssystems software, the coded instructions that are designed to helpcompanies manage their computer systems.
The company used to focus on developing software to make IBMmainframe computers run more efficiently.
But in recent years, Legent has expanded its product line toinclude more software that manages networks of personal computers aswell as mainframes.
Legent has invested $50 million over the past three years inacquisitions, technology licensing agreements and alliances withother companies, producing a family of technologies called XPE, whichstands for "cross-platform environment."
According to John Burton, president and chief executive of Legent,the shift to this new group of technologies can be likened to anautomobile manufacturer building a radically new chassis to transformits machines.
Software magazine recently ranked Legent eighth among the topindependent software vendors. Giant Microsoft Corp. leads the field,followed by Computer Associates International Inc. in Islandia, N.Y.,which is Legent's toughest competitor.
Legent is positioned to become one of the world's top independentsoftware suppliers, said Burton, who last month announced the XPEstrategy.
"The strategy is a good move on their part," said Timothy R.McCollum, a stock analyst with Dean Witter Reynolds in New York.
McCollum said that if fully implemented, XPE would give Legent amore comprehensive approach than any other software company tointegrating various computer systems.
Piecing Together the Puzzle
Robert Knepp, general manager of Shared Service Center, which runsinformation systems for two Blue Cross health plans in Harrisburg,Pa., said that many software users face "an integration nightmare"tying various pieces of software together.
"Legent has looked at the whole puzzle," said Knepp, who is aLegent customer. "Their concept is ahead of the others."
In the meantime, Legent's top competitor, the large and highlyprofitable Computer Associates, has not been standing still.
CA, which is a leader in research and development spending, hasdeveloped products to create "interoperability" among computersystems.
One analyst said that while Legent's XPE concept may be broaderthan any other, Legent is behind CA in actually turning out softwareproducts for so-called distributed systems management.
Legent's stock plummeted 36 percent in mid-July, a day after itannounced that its third-quarter earnings would fall far short ofanalysts' estimates: On July 13, the stock fell $10.12 1/2 to $17.75in trading on Nasdaq's national market system.
The stock has since regained some ground, closing Friday at$24.25.
However, earnings for fiscal 1993 and the fourth ended Sept. 30,to be announced today, are expected to be relatively flat, analystssay.
Weintraut predicts about a 9 percent sales increase for Legent inits 1994 fiscal year, which analysts would consider unimpressive in agrowth industry such as this one.
Legent had revenue of $426.7 million in 1992, a 23 percentincrease over the year before.
Playing to Legent's Strengths
According to Weintraut, Legent must build on two strengths: a goodreputation among its customers and a record of retaining andskillfully using the personnel and assets of the companies itacquires.
Legent was formed in March 1989 through a merger of Vienna-basedMorino Associates and Duquesne Systems of Pittsburgh, a mainframesoftware company nearly equal in size.
In 1992, Legent acquired a systems software rival almost half itssize, Goal Systems International in Columbus, Ohio.
The Legent-Goal merger strengthened Legent's ability to providemore products but it also created problems combining different salesstaffs, Legent officials say.
As Burton explains it, Legent had focused its sales staff on large-scale strategic deals while shifting attention away from the smallersales that have in the past provided the company's bread-and-butterincome.
In recent weeks, Legent has built up its sales staff, aiming for amix of sales managers who can represent all of Legent's products toits major customers and others who can take product specialities tosmaller customers.
Legent has added 54 employees, including specialists in non-mainframe software, to its North American sales staff since July,raising the total staff to more than 160.
The company removed a layer of management from the sales staff andgave more decision-making power to salespeople in the field,according to Bill Drummey, executive vice president for NorthAmerican sales.
In September, Legent and Hewlett-Packard Co., one of the nation'slargest computer companies, agreed to jointly develop, market andsell software that will link traditional mainframe data centers withdiverse "distributed computing" systems.
Fight for Survival
In a highly competitive field, in which some companies will notsurvive, Burton has said his goal has been to "acquire or beacquired."
Three years ago, Robert Yellin, Legent's chief technology officer,laid out a blueprint, called a "distributed systems managementstrategy," to make sure acquisitions and technologies fit together.
"It's better to be the hunter than the prey," said Yellin,referring to Legent's drive to take over smaller companies.
Yellin, who learned juggling a few years ago, likes to take abreak occasionally to toss small plastic balls in the air.
A company and a juggler face similar problems, according toYellin. The trick, he said, is to acquire young, rapidly growingentrepreneurial companies at their peak and then keep them moving.And Legent now has to keep more balls up in the air than mostsoftware companies.
