Say abracadabra, and Menachem Hasfari, who has been the chief executive at Magic Software Enterprises (TASE, Nasdaq: MGIC) for the last four and a half years, disappears.
The CEO of Or Yehuda-based Magic announced his resignation yesterday ahead of the release of second quarter financials in which Magic posted a 6 percent drop in revenues and a net loss of $1.2 million.
Hasfari said yesterday, "This is a long-planned departure, and I'm leaving behind me a strong and able Magic, a company that has now the right strategy and the means to exploit its full potential in its field. My years at Magic were memorable, a time to cherish, and I would like to thank Magic's employees and management for their efforts in building Magic together with me."
Capital market sources said Hasfari's resignation was the result of a decision by the company's board of directors.
David Assia, Magic chairman, thanked Hasfari for his contribution toward the turnaround at the company during what he recognized as a difficult period. "We are sorry to see him leave and reluctantly respected his request," Assia said. "We wish him great success in his pursuit of new opportunities."
Danny Goldstein, chairman and CEO of the Formula group and controlling shareholder of Magic, also expressed sorrow at Hasfari's departure, saying that "Menachem has done a remarkable job of turning the company around and building a strong infrastructure for its future growth." However, the company's transformation has apparently not been completed, as reflected in the second quarter loss reported yesterday.
Hasfari, 58, joined Magic in February 2001 after a year of providing the company with advice as a consultant. From 1992 to 1999 he served as chief executive of Edusoft, a multimedia software development company.
Magic, which specializes in software solutions for system development and integration, is listed on the Tel Aviv Stock Exchange and Nasdaq at a market capitalization of $60 million. For 2004, the company reported a slight increase of 3 percent in revenue to $65 million and a 33 percent jump in net profit to $33 million.
But its troubles seem far from over. Company profits tumbled in the first quarter of 2005 to just $163,000, versus $718,000 in the parallel quarter. Revenues shrank 6 percent to $15.5 million.
Second quarter revenues, at $15.7 million, were 6 percent down on the parallel. Magic's bottom line worsened, moving from a modest profit to a net loss of $1.2 million or 4 cents a share.
Its gross profit margin for the second quarter fell to 57 percent from 61 percent in the parallel.
Hasfari attributed the second quarter performance to several factors. "Our results have been affected by last moment slippage of deals in the USA and Japan," the outgoing CEO said. "Changes in product mix and a weak Euro have also had a negative impact on the quarterly results. However, significant achievements have been made in the doubling of iBOLT [software] sales from the previous quarter."
Magic shares dropped more than 7 percent in Tel Aviv yesterday and later they were trading down more than 8.2 percent on the Nasdaq exchange, at mid-day New York time. The share has dropped 40 percent since the start of the year.
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