GEAC Computer Corporation Ltd.

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GEAC Computer Corporation Ltd.

Yonge Corporate Centre
4100 Yonge Street, 6th Floor
Toronto, Ontario, M2P 2B5
Canada
Telephone: (416) 642-1960
Fax: (416) 642-1961
Web site:http://www.geac.com

Public Company
Incorporated: 1971
Employees: 6,000
Sales: C$990.1 million (US$669 million)(2000)
Stock Exchanges: Toronto
Ticker Symbol: GAC
NAIC: 511210 Software Publishers

Canada-based GEAC Computer Corporation Ltd. is one of the top five global suppliers of the software and systems solutions known as ERP, or mission critical Enterprise Resource Planning. The company provides ERP applications for financial administration, human resources, manufacturing, distribution, customer relationship management (CRM), and supply chain management (SCM). The company was founded in 1971 to develop and market software for online batch processing, primarily to financial institutions, libraries, and academic institutions. During the 1990s the company embarked on an aggressive acquisition strategy and expanded into a wide range of vertical markets, including newspaper publishing, health care, hospitality, property management, and others. Its 1999 acquisition of JBA Holdings PLC doubled the size of the company and transformed GEAC into a leading provider of ERP software.

Software for Libraries and Financial Institutions: 1970s-80s

GEAC was founded in 1971 in Markham, Ontario, by Robert Isserstedt and R. Angus German. In its first year the company broke even on sales of $200,000. It sold software for online processing on existing computers that were built for batch processing. By 1976 GEAC’s software had become too sophisticated for existing computers, so the company began offering its own online computer hardware.

GEAC introduced its first library automation product, the GEAC Library Information System (GLIS) in 1977. The GLIS system proved popular with medium-size and larger academic libraries in North America and elsewhere. It ran on minicomputers manufactured by GEAC and was marketed as a precon-figured turnkey combination of hardware and software. GLIS was initially limited to circulation control, with online catalog access and acquisitions capabilities added later.

In 1980 Charles Williams became president and CEO of GEAC. Under Williams, the company specialized in financial and library applications and was focused on niche markets. Major customers included the Royal Bank of Canada, the University of Waterloo, and York University in Toronto. GEAC was listed on the Toronto Stock Exchange in May 1983 at C$15.75 a share. The company’s stock rose 42.9 percent in 1983 to end the year at C$22.50. In its April 1984 review of high-tech companies, Canadian Business called GEAC “a quality company, well managed and strong on marketing.”

For fiscal 1984 GEAC reported sales of C$61.4 million, up from C$48 million in fiscal 1983 and C$35.6 million in fiscal 1982. Moreover, the company had been profitable every year since 1972, showing a C$6 million profit in 1984. In 1984 the French National Library in Paris awarded GEAC a C$2 million contract to automate its library catalog. The company also won a C$1.4 million contract from the Smithsonian Institution to computerize the catalog of its vast collection. During 1984 GEAC led the library automation industry in new system installations. By mid-1985 GEAC had offices in the United States, United Kingdom, the Netherlands, Ireland, France, and Australia.

However, GEAC began experiencing financial difficulties in the mid-1980s and was in receivership from late 1986 through early 1987. The company posted substantial losses in 1987 and 1988. Its poor financial performance was attributed to an unsuccessful expansion into the U.S. banking market as well as to unfavorable developments in the Canadian banking industry. During this period the company’s library automation business reportedly remained profitable, but uncertainty about the company’s long-term financial stability led to a downturn in new GLIS installations, especially in the United States.

To help ease its financial woes, GEAC obtained $20 million in financing from Helix Investments Ltd., a Toronto-based venture capital firm. Stephen Sadler became GEAC’s chief financial officer (CFO) in September 1987, and with his help GEAC returned to profitability in fiscal 1989 ending April 30. The company acquired new library automation software, called Advance, through the acquisition of Advanced Libraries and Information Inc., which developed the software, for C$3 million. Advance software became available from GEAC in late 1989. The following year Sadler was named GEAC’s CEO.

Aggressive Acquisition Strategy: 1990-95

At the end of 1992 GEAC strengthened its position in the library automation market by acquiring CLSI Inc., which had subsidiaries in Canada, France, the Netherlands, and the United Kingdom. CLSI was the first company to commercialize a minicomputer-based circulation control system and was one of the best-known library automation vendors. CLSI had two product lines: the LIBS 100 system, which was introduced in the mid-1970s, and a second-generation library automation system called LIBS 100plus that was introduced in June 1992. At the time of GEAC’s acquisition of CLSI, more than 50 customers had signed up for the LIBS 100plus upgrade. GEAC paid C$13.5 million for CLSI.

Observers noted that the two companies were complementary in several ways. CLSI was strong in the public library market, while GEAC had focused on academic libraries. CLSI had an effective circulation module that complemented GEAC’s serials and cataloging modules. The library automation systems of both companies were Unix-based. Following the acquisition GEAC developed a transparent interface between the two systems and renamed the LIBS 100plus system Plus. GEAC continued to service and support GLIS and LIBS 100 installations, but the company stopped developing or actively marketing the older systems.

By 1993 GEAC had Advance, its integrated online library system, installed in 48 North American locations as well as at additional international locations. The system included Acquisitions, Authority Control, Cataloging, Circulation, Materials Booking, OPAC (online public access catalog), Serials, and other modules. The system also included optional gateways and interfaces for electronic ordering, online databases, and electronic bulletin boards. GEAC had development centers in Canada, the United States, the United Kingdom, France, Australia, and New Zealand, with operations in ten countries covering North America, Europe, and the Pacific Rim. In addition GEAC marketed and supported CLSI’s LIBS 100 system installations. In April 1993 GEAC acquired Computer Library Services International (Australia) Pty Limited of Melbourne, Australia, which distributed LIBS 100 products to Australian libraries and provided CD-ROM network solutions and database subscriptions there. For fiscal 1993 ending April 30 GEAC reported revenues of C$102.7 and its cash reserves exceeded C$40 million.

As of early 1994 the Advance library automation system was installed in 110 libraries worldwide, the Plus system was in approximately 70 libraries, and there were some 135 GLIS installations and 690 installations of the CLSI LIBS 100 system. Including library consortium participants, GEAC systems automated the operations of more than 2,500 libraries, making GEAC’s the largest worldwide installed base.

During the first half of the 1990s GEAC made several other acquisitions. In 1992 the company acquired McDonnell Douglas Information Systems Canada, a vendor of computer products and services for specialized applications. In 1993 alone GEAC acquired: Mentat Computer Systems Pty. Ltd., an Australian developer of manufacturing software; Concord Management Systems Inc., a Florida-based developer of software for construction companies; MAI Ltd. and Tekserv Computer Services, both located in the United Kingdom; NBI Canada Inc., a Toronto-based reseller of network products; New Tech Hospitality Systems Ltd., an Australian developer of hotel management software; Claymore Systems Group, a developer of Unix-based software for real estate and property management applications; ECI Computer Inc., a California-based developer of computer systems for hotels and convention centers; Nisus Development & Technology, an acquisition that included software to manage golf course pro shops; Datamark International Ltd. of New Zealand and its subsidiary, Dmark International Pty. Ltd. of Australia, both of which developed software for manufacturing companies. These acquisitions were expected to help GEAC maintain a 20-30 percent annual growth rate. The acquisitions shared the characteristic of developing Unix-based products.

In 1994 GEAC acquired Collier-Jackson, Inc., which provided business automation systems to newspapers, from CompuServe, Inc., for an undisclosed amount. Headquartered in Tampa, Florida, Collier-Jackson had about 1,000 customers with some 2,500 different computer software applications in place. CompuServe, then a subsidiary of H&R Block Inc., had originally acquired Collier-Jackson in 1987. The acquisition was expected to enable GEAC to expand its offering in existing markets and take the company into new markets. Following the acquisition, Collier-Jackson was renamed GEAC/Collier-Jackson. The company changed its orientation from mainframe-based solutions to software applications that could be used in a PC-based client/server environment.

Company Perspectives:

GEAC is among the world’s largest suppliers of mission critical e-Business Enterprise Resource Planning (ERP) software and systems solutions to corporations around the globe. Operating globally with more than 10,000 businesses relying on our ERP systems every business day, GEAC is an important and integral component of the emerging e-business world.

Under the leadership of CEO Stephen Sadler, GEAC emerged as a leading Canadian software company. Over the course of five years Sadler oversaw more than 20 acquisitions, many of them financially troubled companies acquired at bargain prices. The acquisitions, along with Sadler’s talent for cost-cutting, drove GEAC’s revenues and increased the company’s profits. For fiscal 1994 GEAC reported record revenue of C$152 million. The acquisitions enabled GEAC to diversify into a wide range of markets, including construction, property management, manufacturing, distribution, newspapers, financial institutions, libraries, hotels, and clubs. In 1996 Sadler became GEAC’s vice-chairman.

Continued Growth: 1996-99

William Nelson was GEAC’s chairman and CEO when the company announced it would acquire Dun & Bradstreet Software Inc. (DBS) in October 1996 for $191 million. Headquartered in Atlanta, Georgia, DBS was formed in 1990 through the merger of Management Science of America Inc. and McCormack & Dodge Corp. At the beginning of 1996 Dun & Bradstreet Corp. announced it would split into three companies and sell DBS, which had annual revenue of some $350 million. In mid-1996 venture capital firm Bain Capital Inc. signed a letter of intent to purchase DBS for $210 million, but the deal fell through. GEAC agreed to purchase DBS for $150 million in cash and $41.25 million in 18-month term notes.

GEAC was attracted to DBS’s large base of mainframe users as well as the growth of its client/server business. DBS had two main software product lines: SmartStream, a line of business client/server applications, and MainStream, a line of software applications for mainframe users. Following the acquisition, GEAC split DBS into two divisions: GEAC SmartStream for client/server software and GEAC MainStream for mainframe applications.

In April 1997 GEAC held its first user group conference since acquiring DBS, at which it outlined a new business plan. The company was reorganized into separate divisions focusing on client/server applications and mainframe applications. The company planned to focus on human resources and financial applications and abandon manufacturing applications. GEAC also planned to focus on critical vertical markets, including financial services, health care, business services, and the public sector.

Following its purchase of DBS, GEAC continued to make other, smaller acquisitions in 1997. Among the companies it acquired was Comp-Tech Inc., a California-based network systems integrator with a client base of more than 170 customers and annual revenue of some $2 million. This acquisition was part of GEAC’s strategy to increase its customer service coverage to include not only conventional maintenance but also network expertise, remote connection services, and on-site help desk capabilities. GEAC expanded its customer service offerings by acquiring Florida Computer & Network (FCN) of Fort Lauderdale, Florida. FCN was a network systems integrator with more than 500 customers and annual revenue of approximately $1.3 million. GEAC also acquired the AMS Group located in Sudbury, Ontario, to strengthen its Customer Service Division. The Northern Ontario company had more than 2,000 customers and annual revenue of approximately C$8.5 million. AMS provided sales and service for several manufacturers’ products, networking and connectivity solutions, CAD (computer-assisted design) services, and computer training and education courses.

GEAC strengthened its position in Australia with the acquisition in January 1997 of FGH Decision Support Systems Pty. Ltd. of Sydney, Australia. FGH was a major supplier of service management software for manufacturing, distribution, and service industries and had more than 800 customers throughout Australia, South Africa, and the United Kingdom. During the year GEAC enjoyed several major sales in the Asia-Pacific region, adding such new customers as the New Zealand Department for Courts, Bank Danamon of Indonesia, the Royal Australian Air Force, and the International Broadcasting Corporation of Thailand.

In mid-1997 GEAC was selected by Software Magazine as one of 13 software companies to receive its Editor’s Choice Awards. “GEAC is notable for management’s bold moves which have created one of the software industry’s largest vendors and a company to watch,” noted the magazine. As a result of GEAC’s acquisition of DBS, the company’s revenue jumped from C$205 million in 1996 to C$381.2 million in 1997 ending April 30. Income from operations rose from C$40.6 million in 1996 to C$57.5 million in 1997, but the company reported a net loss of C$71.1 million for 1997 compared to net income of C$35.6 million in 1996. The 1997 loss was the result of a onetime charge of $121.4 million for expenses associated with software, goodwill, inventory, and fixed assets. GEAC returned to profitability in 1998, as revenue increased 70 percent to C$646.4 million and net income reached C$168.7 million, further strengthening GEAC’s cash position and allowing it to pursue more acquisitions.

GEAC continued to acquire smaller companies in 1998. In January it acquired Princeton Network Systems Inc. (PNS), a computer services provider based in South Plainfield, New Jersey. PNS had annual revenue of approximately $4 million. In December GEAC acquired TWG Technologies Inc., which was based in Vancouver, British Columbia, and had annual revenues of approximately C$3 million. TWG was a provider of NT Server and Unix networked computer system integration and support services to large and mid-sized companies. Both acquisitions strengthened GEAC’s Customer Service Division, which was renamed the Networks and Technical Services Division.

Key Dates:

1971:: GEAC Computer Corporation Ltd. is founded in Markham, Ontario.
1977:: GEAC introduces its first library automation product, the GEAC Library Information System (GLIS).
1983:: GEAC becomes a public company, with stock trading on the Toronto Stock Exchange.
1992:: GEAC acquires library automation vendor CLSI Inc.
1996:: GEAC acquires Dun & Bradstreet Software Inc.
1997:: GEAC receives the Editor’s Choice Award from Software Magazine.
1999:: GEAC acquires JBA Holdings PLC for C$205.5 million.

A larger acquisition involved Remanco International, Inc., a leading supplier of restaurant computer systems with annual revenue of C$20 million. Remanco developed one of the first point-of-sale computer systems for restaurants in 1976. The acquisition strengthened GEAC’s position in the hospitality industry and added a valuable distribution channel for GEAC’s point-of-sale products.

In Australia GEAC acquired Cruickshank Technology Pty. Ltd., a leading supplier of maintenance management software with more than 1,100 sites worldwide. Cruickshank had annual revenues of approximately C$4 million. Its principal product line was the MAINPAC maintenance management solution, a system used to manage company assets in a wide range of industries. GEAC also acquired Stowe Computing Australia Pty. Ltd. and Stowe Computing NZ (New Zealand) Ltd. With annual revenue of A$10 million, Stowe provided municipal government and library management software in Australia and New Zealand. Its customers included some of the region’s largest municipal governments.

GEAC’s largest acquisition of 1998 involved Interealty Corp., based in Vienna, Virginia. Interealty had annual revenue equaling some C$100 million and was a well-known supplier of real estate information systems to the residential brokerage market in North America. It provided software and services to the Multiple Listing Services (MLS) and various regional real estate boards, reaching some 300,000 real estate professionals. Interealty also built and managed web sites for major real estate brokerage firms. The acquisition enabled GEAC to enter a new vertical market with significant market share.

During 1998 GEAC enjoyed large-scale sales of its library software in Europe. New customers included the Amsterdam Public Library, Blois Public Library, and the National Library of France. In the insurance and banking markets, GEAC added Microsoft to its FastApps program. FastApps provided a rapid implementation solution to mid-market insurance and banking organizations.

GEAC also implemented its web strategy in 1998 by introducing CyberStream Human Resources. CyberStream was the brand name given to GEAC’s suite of self-service web applications that could be accessed from a browser-based interface. CyberStream Procurement was also available, and other web-based applications were in development. CyberStream applications were designed to serve the needs of two types of users: the occasional, self-service user who wanted to interact with the system without learning the full system and without maintaining programs on their desktop, and the transaction-intensive user who needed the full power of the SmartStream system through a web environment.

In September 1998 GEAC combined its Enterprise Server and SmartStream Divisions to form the GEAC SmartEnterprise Solutions Division. The new division would deliver a comprehensive, cohesive enterprise strategy to customers, allowing them to leverage their current investments while benefiting from new technology advancements. GEAC recognized that its customers wanted integrated enterprise solutions that combined the power of the mainframe with the flexibility of client/server computing. In May 1999 the SmartEnterprise Solutions Division announced a new web-based portal, Net Foundations, that organizations could deploy to access all server-based and back office GEAC applications across an enterprise. Net Foundations provided customers with a single point of access from any location or device.

Becoming a Leading ERP Software Vendor: 1999-2000

For fiscal 1999 ending April 30, GEAC reported revenue of C$783.0 million, operating income of C$184.4 million, and a net loss of C$111.6 million due to a fourth quarter charge of C$268.9 million for write downs and restructuring charges. Before the end of the fiscal year, GEAC announced a change in leadership, naming Douglas G. Bergeron as GEAC’s CEO and president. Bergeron was most recently Group CEO at SunGard Brokerage Systems Group. As part of the planned management transition, William Nelson, who turned 65 in 1999, would continue as chairman of the board. Stephen Sadler, former vice-chairman, also retired that year.

In September 1999 GEAC completed an acquisition that would transform the company into a leading provider of enterprise resource planning (ERP) solutions. It acquired British-based JBA Holdings PLC for C$205.5 million. JBA was one of the world’s largest mid-market ERP software companies. Its 1998 revenue exceeded C$500 million, and the company serviced more than 4,500 customers in more than 50 countries in industries such as food and beverage, apparel, automotive supply, and electronics. Following the acquisition, GEAC’s projected annual revenue would exceed C$1.3 billion for the combined companies, which would have more than 30,000 customers and 6,000 employees. GEAC claimed it would be the fourth largest ERP software company in the world after SAP, Oracle Corp., and PeopleSoft Inc.

JBA became GEAC’s ERP division, with former JBA CEO Ken Briddon as its head. The JBA name and its products and services would remain unchanged. Its main ERP product line was System 21 for mid-size companies running IBM’s AS/400 mainframe. System 21 was completely web-enabled, gave companies the ability to launch themselves as e-businesses, and ran on GEAC’s @ctive enterprise technology. Following the acquisition GEAC and IBM formed a strategic alliance to provide comprehensive e-business solutions. The alliance gave GEAC access to new customers and revenue opportunities.

Other acquisitions completed in 1999 included the Australian-based Cybergraphic Systems Ltd. for C$16 million. With annual revenue of approximately C$22 million, Cybergraphic was an international provider of integrated information management solutions for editorial, advertising, pagination, and Internet functions of the publishing industry. Its customers included major newspaper groups such as Hollinger, Knight-Ridder, News Corp. and the Fairfax Group. GEAC also acquired the financial and human resources management systems business of Clarus Corporation. Based in Atlanta, Georgia, Clarus had 1998 revenue of more than $40 million and some 300 North American customers.

For fiscal 2000 GEAC reported a 26.5 percent increase in revenues to C$990.1 million (US$669 million). Net income was C$49.1 million. President and CEO Douglas Bergeron noted that GEAC was on track to reach C$2 billion in revenues over the next three years. The company’s strategy was to build a “branded global business from a highly fragmented marketplace,” according to Bergeron. GEAC completed 11 acquisitions in fiscal 2000.

Acquisitions completed between January 2000 and the end of April 2000 included the real estate unit of GTE Enterprise Initiatives, Inc., a subsidiary of GTE Corp. that provided Multiple Listing Systems (MLS) for the real estate industry. This unit, with annual revenue of C$19 million, would be merged with GEAC’s Interealty division headquartered in Vienna, Virginia. GEAC also acquired the remaining 49 percent of JBA s.r.o., an Eastern European distributor of System 21 software and solutions. Another European acquisition involved Denmark’s RunTime, which provided e-Customer Relationship Management (eCRM) solutions to the apparel, footwear, and textile industries. GEAC also expanded its Publishing Systems division by acquiring Gazette Technologies from Gazette Communications, Inc. Gazette’s key product was Marketlnfo, a software suite used by newspapers to provide demographic analyses of specific newspaper markets.

In May 2000 GEAC entered the application services provider (ASP) market by launching Pyramaz as a wholly owned subsidiary. Pyramaz specialized in ERP e-business infrastructure solutions and other e-business services. GEAC would offer Pyramaz solutions as an option to all of its more than 10,000 ERP customers. Customers could reduce the cost of ownership by utilizing Pyramaz’s ASP services. Pyramaz e-Purchase was the first integrated solution offered by the ASP, with Business Intelligence applications and eCRM solutions to follow.

In July 2000 GEAC sold its SmartStream Banking Systems (SBS) business for C$160 million to an investor group led by European venture capital firm 3i. For fiscal 2000 SBS had Generaled C$23 million in revenue. In May GEAC had purchased SBS’s main competitor, Management Data GmbH, which more than doubled the size of SBS’s business. The sale of SBS was part of GEAC’s strategy to “unlock the value” that existed in its non-core vertical market businesses. In March 2000 the company had spun off Interealty.com as a wholly-owned subsidiary.

Toward the end of 2000 GEAC underwent another change in senior management. In October Douglas Bergeron resigned as president and CEO, as well as from the board of directors. Chairman William Nelson was appointed interim CEO. John Caldwell was elected to the board of directors and named interim president and COO. Caldwell subsequently became GEAC’s president and CEO. He was previously president and CEO of CAE Inc., a Canadian technology company that specialized in commercial and military flight simulation. Nelson was replaced by Charles S. Jones as the company’s non-executive chairman of the board.

Looking ahead for 2001 and beyond, GEAC was strongly positioned in the ERP market for mid-size companies and ranks as the fifth-largest ERP software company in the world. During 2000 the company demonstrated its commitment to increase shareholder value, reduce overall debt, and improve the firm’s financial position by divesting its banking systems business, which it considered a non-core vertical market. Having acquired more than 40 companies and products from 1990 through 2000, GEAC remains committed to growth through the selective acquisition of mature application software companies with substantial revenues.