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Peerless Systems Corp. Reports Operating Results (10-K)

May 03, 2010 | About:

Peerless Systems Corp. (PRLS) filed Annual Report for the period ended 2010-01-31.

Peerless Systems Corp. has a market cap of $45.17 million; its shares were traded at around $2.82 with a P/E ratio of 5.64 and P/S ratio of 4.34. PRLS is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Jim Simons of Renaissance Technologies LLC, John Rogers of ARIEL CAPITAL MANAGEMENT LLC.

Highlight of Business Operations:

As part of this strategy, we invested in common stock and warrants of Highbury Financial, Inc. (“Highbury”), beginning in the first quarter of fiscal 2010. On November 25, 2009, we filed a definitive proxy statement with the Securities and Exchange Commission to nominate one director for election to Highbury s board of directors and make certain stockholder corporate governance proposals. Highbury paid quarterly dividends of $0.05 per share of common stock and special dividends of $1.50 and $0.9977 per share of common stock on October 7, 2009 and April 15, 2010, respectively. Over the term of its investment, Peerless received aggregate dividends of $8.1 million on its Highbury common stock.

As of January 31, 2010, we had cash, cash equivalents and marketable securities of $54.6 million (comprised of $36.7 million in cash and $17.9 million in marketable securities). Our cash balance consists of amounts received in the KMC Transaction, revenues received from our operations and dividends received upon our investment in Highbury. As of January 31, 2010, our marketable securities consisted of common stock of Highbury and certain hedging instruments with respect to common stock of AMG. As of April 30, 2010, we owned less than $35,000 of marketable securities.

Our largest customers (greater than 10% of our total revenues) vary to some extent from year to year as product cycles end, contractual relationships expire and new products emerge. Our largest customers accounted for $2.9 million and $9.1 million of our revenues for fiscal year 2010 and 2009, respectively.

We sell our products and services to OEMs which produce products for the enterprise and office sector of the digital document product market. This market is characterized by digital document products ranging in price from approximately $500 to $1,000 each at the low end, to more than $50,000 at the high end. These products typically offer high performance, differentiated by customized features. As a result of these unique requirements, we have typically addressed the office sector of the digital document product market via direct OEM relationships with individual digital document product manufacturers. Our major customers in the office market in fiscal year 2010 included Konica Minolta, Oki Data, Panasonic, Xerox International Partners, and Seiko Epson.

Our agreement with Adobe to bundle and sublicense Adobe s licensed products into new OEM products expired on March 31, 2010. We are unlikely to be able to transition our customer base to another provider. We will only continue to collect licensing fees for the commercial life of all Adobe related products existing as of March 31, 2010 for the useful life of these products under our current sublicensing agreements with customers. We expect a material decrease in our revenues for fiscal 2011 due to the end of this agreement. Our revenues from licensing products that include Adobe technology were approximately $2.5 million and $4.8 million for fiscal 2010 and 2009, respectively.

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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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