It really does seem like Corero CEO, Jens Montana, is driving the business down a steep incline. He is ‘transforming’ the once profitable provider of software to the UK education market into a network security play (see Corero returns to profit as transformation begins) but all that seems to be happening is that it is losing more and more money.
In fact Corero lost more money in the first 6 months of this year than it did in the whole of 2011. Headline revenues grew by 45% to $10.8m (they now report in USD – see Mixed messages as Corero switches currency), much to do with the reverse-in to US-based Top Layer Networks last year (see Corero finds a new Top Layer (two, actually!)). Net losses were ‘transformed’ from $1.4m in H1 2011 to $2.6m, exceeding the $2m 2011 FY loss.
The losses were entirely due to the emergent network security division (CNS). Corero Business Systems (CBS) – the UK education software division – generated the only profit – about $1m – on $4.1m of revenues, which by the way were up 34%, all organic. However, CBS operating margins lost over 3 points yoy, to 24.6%. Operating margins for 2011 were 31.3%, so this squeeze is a little worrying.
Meanwhile, Corero COO Andrew Miller (for it is only his name on the results announcement) (no relation, by the way) warned that ‘ongoing macroeconomic uncertainty’ was extending sales cycles in CNS; indeed CNS revenues were ‘lower than expected’, at $6.7m.
I am assuming that Montana and Miller are hanging on to CBS for as long as they can in order to keep the rest of the boat afloat. There would surely be many potential buyers for CBS (RM, Capita, to name just two); management just have to make sure they don’t drain the very lifeblood out of the division so that there is still something of value to sell when the CNS division can stand on its own two feet – or falls into the chasm.