Autonomy profits jump as searches soar

By Marc Jones

LONDON (Reuters) - Search software company Autonomy Corp posted a sharp jump in fourth-quarter profit on Thursday, boosted by strong demand for its clever software and the benefit of buying its closest rival over a year ago.

Autonomy, which develops software capable of spotting themes and pulling together data from the tangled mass of information spread across a company’s IT system, said fourth-quarter core earnings rose to $24.5 million (12.4 million pounds) from $7.667 million a year ago, on total sales of $73.35 million, up from $31.56 million.

Full year pretax profit was $69.1 million, ahead of the average forecast of $63.19 million in a poll by Reuters of six analysts.

"The business is just very strong at the moment," chief executive Mike Lynch told Reuters, adding that changes in U.S. legal procedures and the need to search an ever ballooning mass of data was helping the firm.

"Everyone is trying to deal with unstructured information and they realise it’s a key part of not being sued and having a competitive advantage."

Shares in Cambridge-based Autonomy have risen around 46 percent over the past four months, outperforming the rest of the software and computer sector <.FTASX9530> by more than 16 percent.

By 8:56 a.m., shares in the firm were up 4 percent .....continued below

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PROFIT BOOST

Autonomy, whose software can search information from video footage and telephone calls to e-mails and instant messaging records, bought closest rival Verity in 2005.

Lynch said that pulling the plug on less profitable parts of Verity had helped profits.

"We have made some acquisitions which have helped the revenue growth but it is the restructuring in there which has led to the rapid profit growth."

Autonomy, said gross margins remained flat at 91 percent and the weakening dollar had little impact on revenues, while the firm’s average selling price for its software rose to $380,000 from $360,000.

Analysts said the firm’s growth was progressing well as expected.

"This is undeniably a solid result, but with estimates for Autonomy already incorporating mid-teens top line growth in the coming years, with margins moving into the high 30’s, upgrades are likely to be limited," said analysts at Deutsche Bank.