Clarify's stock jumps on Nortel deal
Shares of Clarify jump 37 percent following Nortel Network's announcement that it will acquire the front office software maker and after Clarify said it expects stronger third-quarter earnings.
Clarify closed today up 16.69 points to 62 on 8.9 million shares.
The jump comes after the $130 million software maker said yesterday it will be acquired by networking equipment giant Nortel in a stock-for-stock deal worth $2.1 billion. Under the deal, San Jose, Calfornia-based Clarify will operate as a wholly-owned subsidiary of Nortel.
Clarify said it expects to report revenues of approximately $62 million to $63 million and earnings per share above consensus estimates. Currently, analysts polled by First Call project the company will earn 19 cents a share. Clarify is slated to report complete third-quarter earnings Thursday.
Clarify makes customer relationship management software that automates a company's sales, marketing, and customer call center needs. The company competes in the growing front office market led by rival Siebel Systems.
Market research firm International Data Corporation expects the worldwide market for CRM software to grow to $11 billion in 2003, up from $1.9 billion in 1998.
Adams, Harkness & Hill financial analyst Ben Rose said yesterday's deal is a great one for Clarify's shareholders. The stock deal values Clarify at 68 a share, a 50 percent premium to Clarify's recent closing price of 45.31. Rose expects Clarify to report $215 million in 1999 revenues, more than 70 percent growth over last year.
"Nortel [bought the] undisputed No. 2 player in the market," Rose said.
But analysts say consolidation--as well as the expansion of how CRM software is used within corporation--is making the market more difficult for investors to track. Over the past several years, larger software firms have been gobbling up smaller players: Siebel bought call center software maker Scopus; Dutch software maker Baan bought CRM software maker Aurum; and business software maker PeopleSoft bought Vantive just last Monday.
Banc of America Securities analyst Robert Austrian said recent deals only make life easier for Siebel, which has a market value of $7.8 billion and is four times the size of Clarify and eight times the size of Vantive.
"The far and away share leader is Siebel," said Austrian, who rates the company a "strong buy." "Siebel's No. 1 and No. 2 competitors have just been gobbled up in transactions."