Kronos Inc., of Chelmsford, Mass., has bought a software unit of rival Tyco International Ltd.’s SimplexGrinnell for an undisclosed amount of cash to expand sales of employee-tracking systems to smaller businesses.
Kronos purchased SimplexGrinnell’s integrated software unit to gain more customers with 500 to 1,500 employees, Kronos Chief Executive Mark Ain said. That category includes about 7,000 of the unit’s 8,000 customers, he said.
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Kronos, which has traditionally targeted larger corporations, wants to increase sales to mid-sized companies to 50 percent of its total, compared with 30 percent to 40 percent currently, Ain said. The Chelmsford, Massachusetts-based company reorganized its sales force in October, devoting one-third to smaller companies, he said.
“The real benefit will be the customer base,” said Matthew Kempler, an analyst with Sidoti & Co., who rates the shares “neutral” and doesn’t own them. “It’s been a market they’ve lost focus on.”
Kronos products are used for functions such as clocking hourly employees in and out of the workplace.
The company will eventually transfer the SimplexGrinnell customers from systems that run on personal computers to Kronos systems that are on the Internet, Ain said.
“As we want to continue to grow our company and grow our revenues, it was the place that made sense,” Ain said in an interview.
Kronos shares fell 80 cents to $47.58, and have more than doubled in the past year.
Management Products
The integrated software unit is part of SimplexGrinnell’s Workforce Solutions Division, which includes management products such as WinStar and eForce. Kempler estimates the unit’s annual sales at $30 million.
Tyco acquired the unit in its Jan. 5, 2001, purchase of Simplex Time Recorder Co. for $1.15 billion. It has more than 200 employees, and Kronos will probably hire 140 to 150, Ain said.
The acquisition is the sixth for Kronos in the last year, and the company’s largest yet, Kempler said. Kronos has been buying rivals and distributors of its own products, he said.
The company is also planning to move into the human resources and payroll area, probably through another purchase or an alliance.
“They’re going to have their hands full,” Kempler said.
Costs related to the acquisition may cause Kronos earnings to decline in the next two quarters, though the purchase is expected to add to earnings after that, Ain said. The company plans to provide specific forecasts on a Jan. 23 conference call to discuss financial results, he said.
Kronos had sales of $293 million for its last fiscal year.
Bloomberg News
