SPSS Inc., a global provider of predictive analytics technology and services, announced that it licensed the exclusive worldwide rights to distribute the Sigma-series line of products to Systat Software, Inc., a subsidiary of Cranes Software International Ltd. Sigma-series products are used by scientists and engineers for data presentation and analysis, including the flagship SigmaPlot offering, SigmaStat statistical analysis package and SigmaScan image analysis software. In addition to the distribution license, the agreement also involves the acquisition of all related customers, personnel and fixed assets for cash payments to SPSS totaling $13 million. In 2003, SPSS recognized revenues of approximately $6 million from sales of Sigma- series software.
"Demand for Sigma-series products is as solid today as it was when we acquired them in 1996," said Jack Noonan, president and chief executive officer of SPSS Inc. "Yet these offerings are now peripheral to our previously stated strategy of establishing leadership in the predictive analytics market by leveraging our core expertise in the analysis of people's attributes, actions, and attitudes. This agreement both tightens our strategic focus and strengthens our balance sheet for the task ahead."
Systat Software has the option to purchase all related intellectual property, including brand names and trademarks, after three years for an additional $1 million in cash. The company immediately assumes responsibilities for marketing and sales of the products as well as their ongoing development and technical support.
"We are continuing the original vision of SPSS in combining the power of the Sigma-series and SYSTAT offerings," said Tanveer Khader, president of Systat Software. "These two product lines will be at the foundation of our commitment to provide high-quality, cutting-edge software to scientific researchers around the world."
Edward Hamburg, SPSS executive vice president and chief financial officer, explained, "The agreement became effective on December 29, 2003. $9 million of the payments were received on that day, with another $3 million due in 2004 and the final $1 million at the end of 2005. While still working through the details, we will account for the transaction in two parts:
- As a licensing of software, for which the revenues will be recognized ratably over three years starting in December 2003; and
- As a sale of assets, the net effect of which will appear on our fourth quarter 2003 income statement.
"This transaction should not affect operating performance results in the 2003 fourth quarter," Hamburg continued. "It will, however, reduce our revenues in 2004 and be $0.03 to $0.04 cents dilutive to earnings until the cash is deployed in strategic and similarly profitable directions."
Hamburg concluded, saying, "These effects, combined with the recent Data Distilleries acquisition, our view of the current competitive landscape, and our sense of limited change in market conditions during the first half of next year, lead us to provide the following guidance for the company's performance in 2004:
- Revenues between $220 and $230 million;
- Diluted earnings per share between $0.75 and $0.85; and
- Operating income between 10 and 11 percent of revenues.
This guidance also assumes a gradual strengthening of the United States dollar against other major currencies throughout the year, as well as a pattern of quarterly revenues and earnings roughly consistent with prior years."
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