Caminus Corporation, a leading provider of integrated software for the global energy markets, announced that its next generation energy transaction management platform has successfully completed rigorous load and scalability testing at IBM's Partner Solutions Center in Waltham, Massachusetts.

Analysis
For background, Caminus (NASDAQ: CAMZ) was founded in May of 1998. It was created through the acquisition of Zai*Net Software, Caminus Energy Ltd., Positron Energy Consulting, and DC Systems, Inc., all providers of software and services to the energy industry. Caminus provides software solutions and consulting services to energy companies throughout North America and Europe. The company's clients include British Energy, Consolidated Edison, Conoco, Dynegy, El Paso Energy, Endesa, and Royal Dutch / Shell. The company's software solutions and related services address multiple types of risk and energy commodities. Caminus is best known for its ZaiNet software suite. ZaiNet enables energy market participants to manage complex risk scenarios and trade and manage energy transactions.

Caminus represents a company going through extraordinary changes. Not only is the company introducing a new energy transaction management platform, Caminus is also finishing a massive cost reduction program, and is in the process of being acquired by SunGard Data Systems (NYSE: SDS). Let's take a closer look at these changes, and their associated implications for Caminus.

New Platform
According to Caminus, the testing performed by IBM on the company's new energy transaction management platform achieved loads that are on par with the demands of Fortune 100 energy enterprises. The Caminus next generation platform leverages Java enterprise architecture and message based technologies to Provide scalable and distributed capabilities needed to support enterprise energy applications.

Caminus is introducing the platform in an effort to Provide additional robustness that large energy enterprises need. The platform is also expected to have the flexibility that expanding and rapidly changing energy operations require. A Beta version of the platform is currently being implemented at an unnamed North American energy company. The platform is due for general release in the second half of this year.

The simulations conducted as part of the testing process included multiple Web servers and multiple application servers communicating with an IBM database cluster. Highly concurrent user loads, reportedly on par with the demands of Fortune 100 energy enterprises, were simulated modeling simultaneous processes such as trading, scheduling, and back office accounting.

"Our goal was to blend the real-time, high speed capabilities of front office trading systems with the functional depth of traditionally two-tier middle and back office systems," said Bec Wilson, Caminus SVP of Engineering. "This test at IBM's facility validates that we have been successful."

Additional Changes
Caminus recently finished a major cost reduction program. The company recorded a $2.6 million restructuring charge during its most recent quarter, and has completed the cost containment provisions that it began to implement last summer.

As part of the program, Caminus cut its workforce by 17%, to approximately 440 employees at present. The measures should reduce expenses by $10 million on an annual basis.

The cost reduction program was in response to the fact that many of Caminus' customers have reduced technology spending amid the Enron debacle, and subsequent collapse in the energy trading sector. While Caminus managed to grow revenues, which were up 29% to $63.8 million through the most recent twelve months, its net loss for the same period rose 95% to $12.7 million.

As a result, the company's stock has been languishing, that is, until SunGard's bid to Acquire the company for $159 million. Since the acquisition announcement, Caminus stock has risen from $2.50 a share to $8.60 a share, a gain of over 300%.

The purchase of Caminus appears to be aimed at helping SunGard broaden its product offerings to companies in the energy sector. The company's SunGard Trading and Risk Systems group has developed two products that are geared for the energy industry: Epsilon and Panorama. Epsilon is a suite of software products used by traders, risk managers, financial officers, and back-office personnel to manage their energy transactions while controlling financial exposure. Panorama integrates with the Epsilon product to allow for both physical and financial energy products to be captured alongside capital market transactions, and aggregated in a consistent manner for computing cross-asset risk measures.

SunGard has been one of the most acquisitive technology companies around, having completed roughly 100 deals since 1986. SunGard's acquisition spree has helped to bolster the company's revenues upwards of 30 percent, year over year, which has helped SunGard weather the severe decline in corporate technology spending.

SunGard also appears to do a great job at integrating the company's acquisitions. The company's operating margins, currently at approximately 32%, have remained relatively steady, year over year.

Despite the numerous acquisitions, the company's balance sheet remains strong. The company has over $300 million in cash, and during the last nine months, the company retired approximately $230 million of its long-term debt. The company plans to Continue to Reduce its debt levels, which should help lower interest expense. This will also enable the company to make additional acquisitions, without becoming over leveraged.

SunGard's acquisition of Caminus will certainly establish it as the leading energy trading and risk management software provider. Ironically, Caminus had itself been on an acquisition spree over the last couple of years in an attempt to expand its product line. The company acquired rival Nucleus Corp. of Houston in August 2000 for $19.6 million. The acquisition extended the company's product line and added major energy players to its customer base. In November 2001, Caminus also purchased the software operations of Altra Energy Technologies Inc., a privately held Houston provider of systems for the gas and gas pipeline sector, for $60 million in cash and stock. The strong balance sheet of Sungard will allow the company to resume such strategic acquisitions.