04 March 2013

Compuware cutting jobs, shutting offices across world

Story first appeared on The Detroit News -

Detroit-based software company to initiate first phase of plan to save $60M

Compuware Corp. plans to lay off 160 employees and close or shrink 16 of its offices around the world to cut costs, according to company filings.

The Detroit-based software company will begin the first phases of a previously announced plan "to reduce costs and improve operating efficiencies by $60 million over the next three years," according to documents filed Friday with the U.S. Securities and Exchange Commission.

This first phase of the plan will "represent approximately $23 million in annualized cost savings over the next 12-18 months," the filing says. At the same time, the company says employee severance packages and early termination charges for breaking leases could cost about $25 million.

The filings say about $16 million of the restructuring charges are expected in the remainder of the quarter, which ends this month, and the rest will be addressed after the fiscal year ends.

The entire first phase of the plan should be implemented by October, the documents say. The cuts would account for less than 5 percent of Compuware's global workforce "across all operating and administrative divisions," according to the filing.

Lisa Elkin, Compuware senior vice president of investor relations, marketing and communication, declined comment Friday.

Compuware has not confirmed if it is looking for a buyer, but in January, the company's board rejected a $2.3 billion offer from New York-based Elliott Management Corp., which owns 8 percent of Compuware. The company said the hedge fund's $11-per-share offer was too low.

Compuware stock closed Friday on the NASDAQ at $11.67 per share, up 6 cents or 0.5 percent.

Erik Gordon, business professor at University of Michigan, said the cost-cutting effort was not surprising and gives Compuware time to get its finances in order before other bids come in.

"When you get a takeover offer, it's like a poke in the back with a stick. It wakes you up," Gordon said. "In order to defend (against) those takeovers, you have to say you are working on a long-term strategy, and the best thing to do is to give the company time to let those strategies take hold."

The company will target higher-salary employees to create the $23 million in savings during the first round of layoffs and cutbacks, Gordon said.

"It's going to be some high-level people," he said. "This is going to be programmers and very skilled workers."

In January, the company reported its third-quarter profit in 2012 rose 17 percent to $25.3 million from a year ago. But its net income through the first nine months of the year fell 24 percent to $46.4 million.

Compuware has forecast a 1.5 percent to 3 percent drop in revenue for the fiscal year ending March 31. Last year, the company had 4,567 employees, including 1,973 at the company's headquarters near downtown Detroit's Campus Martius. It moved from Farmington Hills in 2002.

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