Wang Laboratories Inc was playing games with its year-end figures released yesterday. It proudly announced something called EBITDA of $138.0m for the year. For the uninitiated, the clumsy EBITDA stands for Earnings Before Interest, Income Taxes, Depreciation and Amortization. But what’s the point of that as a measure of success, unless you’re trying to hide […]
Wang Laboratories Inc was playing games with its year-end figures released yesterday. It proudly announced something called EBITDA of $138.0m for the year. For the uninitiated, the clumsy EBITDA stands for Earnings Before Interest, Income Taxes, Depreciation and Amortization. But what’s the point of that as a measure of success, unless you’re trying to hide something? If you are unable to even pay the interest on your debt, then you’re bust, to take just one of the elements. Instead of earnings of $138.0m for the year to June 30, the Billerica, Massachusetts company actually turned in net losses of $600,000 – quite a difference. These losses were after a $27.2m charge for purchased research from the acquisition of Sigma Imaging Solutions Inc (CI No 2,718) and were down from losses the year before of $61.3m, which also included a hit for $64.2m, for similar reasons due to the acquisition of Compagnie des Machines Bull SA’s US maintenance operation. Revenues for the year were up 15% to $1,089.8m. For the fourth quarter, fourth quarter net profits were up 44% to 8.2m, on revenues that fell 6% to $268.1m. All the periods include amortization of tangible and intangible assets, both acquired and as a result of an accounting change. Meantime, Wang has indicated that it’s taking its new role as a services company very seriously indeed, by announcing the acquisition of I-Net Inc, a Bethesda, Maryland-based network and desktop outsourcing company for a total consideration of $167m. I-Net’s revenues were $327m in fiscal 1995. Wang is paying $100m cash and the rest in the form of a $66.7m one-year interest-free loan note. The company is also assuming I-Net’s $40m or so debt and said the acquisition will be earnings-dilutive for fiscal 1997, but beneficial thereafter. I-Net will remains as a wholly-owned subsidiary within the greater Wang. I-Net has 3,000 people dotted around its 50 offices worldwide. Wang CEO Joseph Tucci reckons the acquisition will turn the combined companies into a $1,500m network services company. It’s got a long way to go before it gets to that as last year, Wang’s total service revenues were up 24% at $720.9m, while products were virtually flat at $368.9m. But I-Net brings a lot of federal government contracts with it, and Tucci reckons Wang will generate $400m in federal services revenues alone. The figures for the year just gone were boosted by the acquisition of Avail Systems Corp (CI No 2,810), deemed a very shrewd one by most watchers. Wang’s very close to Microsoft Corp these days, partly as a result of having the Redmonder over a barrel with a patent infringement case which caused it to take a 4.5% stake in Wang, invest $90m and sign a long technical, service and marketing agreement in return for Wang software licenses and desktop imaging and object controls, which were the subject of the infringement case and are included in Microsoft operating systems. (CI No 2,644). Microsoft’s CFO Mike Brown got a seat on the Wang board to ensure everything remained ship-shape.