Is OpenText's Growth Slowing Too Fast?
The cloud computing revolution has forced companies of all kinds to evaluate their technology needs, and information management specialists like OpenText (NASDAQ: OTEX) have been able to take advantage of soaring demand for the services they provide. Yet as with any high-growth business, cloud computing has drawn in a lot of competitors, and even as OpenText has implemented a long-term plan to keep itself among the leaders of the industry, it has started to see some signs of slowing growth.
Coming into Thursday's fiscal fourth-quarter financial report, OpenText shareholders wanted to see faster growth in some key areas of its business. Instead, OpenText's growth just about disappeared, with overall sales growth actually turning negative. As a result, it's possible that high-growth investors might be starting to lose interest in the information management company.
OpenText's fiscal fourth-quarter results showed some cause for concern. Revenue of $747.2 million was down 1% compared to year-ago levels, falling well short of the modest growth that most of those following the stock were expecting to see. Net income climbed 17% to $72 million, but after extraordinary items were accounted for, adjusted earnings of $0.72 per share were flat from the previous year's fiscal fourth quarter.
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