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Accelrys to Retire 'Lower Profitability' Symyx Content Products in Restructuring

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By Uduak Grace Thomas

Accelrys this week said that it plans to retire several underperforming products in its Symyx content business as part of a restructuring effort.

In the restructuring, which occurs 10 months after the companies merged last July, the company plans to retire the entire line of Symyx reaction databases as well as the DiscoveryGate Classic platform, which will be available to customers until May 31, 2012.

During a conference call to discuss the company's first-quarter results, CEO Max Carnecchia said that the changes "will enable us to place an emphasis on the integration of Accelrys content with the broader software organization and portfolio" and put greater focus on "areas that bring the most value to our customers."

The company did not disclose how the restructuring will impact headcount.

Accelrys will focus on maintaining and further developing its Available Chemical Directory, a chemical sourcing database with nearly 3 million compounds; the Screening Compounds Directory, which contains more than 9.5 million compounds; and specialty bioactivity databases, company representatives said.

The company has released a replacement for the DiscoveryGate Classic platform, dubbed All New DiscoveryGate, which provides access to its chemical directories. The tool lets users search for chemicals by identifiers like the MFCD number or chemical name, or by chemical structure as well as compare results by price, quantity, and purity.

Carnecchia also said that Accelrys is retiring third party databases that Symyx was distributing as part of its purchase of MDL from Elsevier in 2007, adding that the market for these resources had declined in recent years.

"The content business overall — especially the third-party databases that are not proprietary content from Accelrys and Symyx — have been in a pretty precipitous decline over the course of the last four or five years, both based on their status in the market but also the market condition," Carnecchia said.

"We are trying to … get rid of the businesses that aren’t on strategy for us, integrate the business of content that is on strategy for us with our software business, and do it in a way that allows us to mitigate the ongoing deterioration of that business," he added.

CFO Michael Piraino added that the third-party databases had higher costs associated with them, such as royalty fees, which made them less profitable than in-house developed content products.

"What we are basically doing is retiring products that have lower profitability," he said.

Financial Results

The restructuring comes as Accelrys reported a 66 percent rise in first-quarter revenues to $34.6 from $20.8 million in the year-ago quarter, which did not include revenue from the Symyx business.

Piraino said Symyx content revenue comprised approximately 12 percent of the company's overall revenue for the quarter and that restructuring charges and business consolidation costs are expected to cost the company between $1 million and $1.5 million — primarily in the second and third quarters.

Net loss for the quarter more than doubled to $5.7 million, or $0.10 per diluted share, from $2.4 million, or $0.09 per diluted share, for the same period in 2010.

Subscription renewal rates on term licenses for the quarter were 84 percent on a dollar basis while maintenance renewal rates on perpetual licenses averaged 79 percent, and content renewal rates on subscriptions were 84 percent.

Furthermore, six renewals exceeded $1 million during the quarter, Piraino said.

In Q1, software orders for legacy Accelrys products as well as orders for its Pipeline Pilot workflow platform were down compared to the same period a year ago.

Accelrys expects Pipeline Pilot orders to exhibit double-digit growth on a full year basis, however, in part because of the product's adoption into other industries beyond life science such as chemicals, energy, and consumer packaging.

Meanwhile, orders for several legacy Symyx products performed at or above expectations for the quarter.

In response to an analyst's question about year-over-year results for the company's Electronic Laboratory Notebook, Carnecchia said comparisons were difficult to make because of differences in tracking metrics of the two companies prior to the acquisition and subsequent integration.

Revenue breakout for the quarter by geography was 47 percent for North America; 29 percent for Europe, Middle East, and Africa; and 24 percent for Asia-Pacific.

Accelrys reported first-quarter business consolidation costs of $1.6 million attributed to personnel costs, severance costs, and professional fees related to the integration of IT infrastructure.

As of March 31, the company had $151 million in cash, cash equivalents, marketable securities, and restricted cash.

Accelrys expects its non-GAAP revenue for the year ending Dec. 31, 2011 — adjusted for expected write-down of deferred revenue — to be between $152 million and $156 million and non-GAAP fully diluted earnings per share to be between $0.33 and $0.35.

The projected figures take into account disruptions to the company's business as a result of the recent natural disasters and the ongoing nuclear crises in Japan as well as its ongoing restructuring activities, Piraino said.

Currently, Accelrys has 548 employees, up from 362 for the same period last year.


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