Landmark Turns its Attention to Wall Street
Landmark Turns its Attention to Wall Street
By Bob Starzynski
Landmark Systems Corp. wants to take on the public market, despite an unimpressive performance in recent years.
The Vienna, Va., software company filed documents with the Securities and Exchange Commission last month announcing its intent to raise $37 million through an initial public offering on the Nasdaq National Market.
If the offering is successful, Landmark could pocket close to $20 million on the deal. The company, which has had a working deficit since at least 1992, plans to use a large part of the proceeds as working capital. The rest is tagged for general corporate purposes, including possible acquisitions. The company said in the prospectus, filed Sept. 15, that no such deals are currently under negotiation.
As with most Wall Street deals, investors will likely pay careful attention to Landmark's financial track record.
Landmark's revenue has grown less than 10 percent for each of the last four years, with $36.6 million in sales last year. And, the company posted its first profit since 1993 in the fourth quarter of last year.
The return to profitability follows a refocusing of development, marketing and sales efforts that took place last year. For the first six months of 1997, revenue is up 16 percent over the same period last year. At the same time, cost cutting and new marketing approaches have turned a $1.6 million loss into a $527,000 profit. This could note that things are changing for the better for Landmark. Still, significant fluctuations in operating results should continue, according to the prospectus.
Michael Carpenter photo
CEO of Landmark
Katherine Clark, chief executive officer of Landmark, would not comment on the offering, citing SEC regulations that prohibit company officers from commenting on a pending offering. However, she said in July that the company's revenue growth has been good. "But it's not good enough," she added.
Like most other technology markets, Landmark's is a highly competitive one. The company makes performance management software for mainframe and client/server computer systems. That market, estimated by Framingham, Mass.-based International Data Corp. to be generating almost $2 billion a year, is saturated.
"Some competitors have longer operating histories and substantially greater financial, technical ... and other resources, as well as greater name recognition and a larger customer base" than does Landmark, the prospectus noted. Because there are low barriers to entry in the software industry, other players could lower prices and reduce margins. Landmark, the prospectus continued, could eventually lose market share.
"This is a very fickle market," said an executive with another software company, who asked not to be named. "Companies with a lot of potential will do extremely well with investors. But the market does not like companies that might miss their targets."
Both Landmark and underwriters Unterberg Harris and Wheat First Butcher Singer are betting that the offering will succeed. The plan is for as many as 3.7 million shares to be sold at $10 a share. The offering will give the company 10.7 million shares outstanding and a potential market value of $107 million.
Of the shares being sold, 1.2 million will come from three people, Clark, Chairman Patrick McGettigan and Jeffrey Bergman, former president of the company. Clark and McGettigan, who is Clark's ex-husband, started Landmark in 1982. McGettigan is no longer involved in the company's day-to-day operations, but is still the largest shareholder, with 4.7 million shares. He also currently makes $300,000 a year to serve as chairman. Following the offering, that salary will drop to $100,000 a year.
Bergman, the company's third-largest shareholder after Clark and McGettigan, left the presidency five years ago. But because of a five-year noncompete agreement he signed with Landmark, he was still paid $20,000 per month until earlier this year. Calculated out to $240,000 per year, he and McGettigan have both been making more than Clark, the company's top officer (who makes $222,500 a year).
Clark is also pulling away from the day-to-day running of Landmark. She hired Ralph Alexander two years ago as chief financial officer. Five months later she promoted him to chief operating officer. Then, last week, he was promoted again to president.