Three weeks after closing its $123 million acquisition of MDL Information Systems, Symyx disclosed this week that it will lay off 124 employees — 18 percent of its staff — as part of a broad restructuring plan that will “reduce overlap and streamline operations.”
Symyx officials said the restructuring, which it expects to complete in the fourth quarter, will save the company $20 million in annual costs.
When Symyx announced its plans to acquire MDL from Elsevier in August, Symyx had 400 employees and MDL had 300. At the time, company officials declined to discuss whether the integration process would include layoffs [BioInform 08-17-07].
Symyx CEO Isy Goldwasser said this week during a conference call to discuss the company’s third-quarter earnings that, following the restructuring, Symyx will have 200 developers in its Software group, which contains the MDL business.
The software business will be based in San Ramon, Calif., approximately 40 miles north of Symyx's Santa Clara, Calif., headquarters. Tim Campbell, president of the Symyx Software division, is currently leading what Goldwasser called the company's "customer outreach initiative" as part of the integration process.
Based on early feedback, Goldwasser said, “existing Symyx customers are looking forward to additional features and capabilities resulting from an expanded product suite,” while “legacy MDL customers are looking for increased functionality and applications expertise from the Symyx team.”
Regarding the layoffs, Goldwasser said, “it's always a painful step to take and not an easy one when organizations are used to working in a mode for decades.” However, he noted, the decision was “one that I think was necessary and, going forward, I'm really very excited [and] I think other people are too about the organization and its potential.”
In response to an analyst’s question about whether the layoffs would be “cutting too much into the bone of MDL,” Goldwasser said that Symyx has “built an operating plan for success of the software business.”
Regarding the overlap in development, “it really was a case of looking at the entire business, the set of products, and looking at the right structure for the business going forward to give it a foundation, so that it would be profitable, it would be growing over time,” he said.
MDL’s Declining Top Line
Symyx announced the restructuring in conjunction with its financial results for the quarter ended Sept. 30, which revealed that MDL’s revenues were in decline while it was part of Elsevier. For 2004, 2005, and 2006, “applicable” MDL revenues were $85.5 million, $90.3 million, and $81.9 million, respectively. For the first nine months of 2007, MDL’s revenues were $58.4 million.
“As these figures indicate, MDL's top line has declined recently, reflecting some renewal attrition and lower new licensing and consulting revenues,” Rex Jackson, executive vice president and chief financial officer, said during the call. “We believe these issues were substantially due to the uncertainties and disruption occasioned by a prolonged M&A process and to delays in releasing new products.”
He added that Symyx “took these factors into account in the acquisition process” and that the company is now “moving aggressively to address these issues.”
Jackson said that cost savings of $20 million from the restructuring, together with increased investments in sales, marketing, and customer support, “should help us drive better top-line and bottom-line performance in Software and in our other businesses.”
“It really was a case of looking at the entire business, the set of products and looking at the right structure for the business going forward to give it a foundation, so that it would be profitable, it would be growing over time.”
Symyx reported total revenues of $26.1 million for the quarter — a 12-percent decline from $29.5 million in the third quarter of 2006, although the year-ago figure included $2.1 million in revenues from a sensor business that Symyx has since discontinued. The results were in line with company expectations, Jackson said.
Revenues in the software segment declined to $5.7 million in the quarter from $6 million in the year-ago quarter.
For the fourth quarter of 2007, Symyx forecasts revenue of between $40 million and $46 million, including around $4 million from MDL. This excludes approximately $15 million in deferred MDL revenue for the quarter that Symyx said it can’t recognize as revenue under US Generally Accepted Accounting Principles.
Symyx estimates total revenues of $160 million for 2008, excluding approximately $11 million in MDL deferred revenue that it will not be able to recognize under US GAAP.
Revenue upsides in 2008 include new license revenue from the recently launched Isentris 3.0 platform, new revenue from the company’s Electronic Lab Notebook product portfolio, and increased consulting revenues from the combined Symyx and MDL software businesses, Jackson said.
Laurie Wiegler contributed to this report.