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Compared to the strong first quarter of the previous FY group sales were down 25% in Q1 11/12. As a result of scheduled postponements of product launches in favour of Q4 2010/2011 and Q2 2011/2012, a sales decline has been expected. However, revenues were also impacted by a weak retail business and returns from the Christam business (cf. Comment/downgrade of November 17, 2011). The overall drop in revenues was stronger than expected.
Extensive cost cutting measures were implemented as early as Q1 2011/2012 to counter the weak earnings development. These measures should become visible in the subsequent quarters without limiting the accelerated entry in the market for PC system tools and the expansion of the B2B business. Here marketing expenses are expected to be higher. In the system tools segment Magix has founded its own subsidiary "simplitec GmbH" already in December. The subsidiary is focused on PC system tools. Marketing of this product group will be significantly pushed in spring 2012. The PC system tools' market volume is much larger than the market for multimedia software addressed so far. In the case of simplitec, Magix can also resort to the experiences and relations in sales and distributions established in the present core market. In the medium term Magix will basically also benefit from the introduction of Windows 8.
More information on the preliminary quarterly figures will be published by the company on January 31, 2012 together with the annual accounts. The complete Q1 report will be published on February 29, 2012. As the second and third quarters are typically also weak the news flow will be burdened in the medium term as well. Despite the planned product launches, particularly in the promising new system tools segment, Q4 2012 will make the decisive contribution to the annual result in 2012. In this respect, the dependency on a good Q4 will presumably be much higher than in the previous years. All in all, the estimates have to be considerably trimmed in view of the weak start to the year.
Based on the new estimates the PT is EUR 5.80. Hold rating reiterated.
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