When Integral Systems pulled the plug last year on its attempt to find a buyer,
officials with the provider of satellite-control software and ground systems insisted that the offers they were getting – and the company’s stock price – did not reflect its underlying strengths.


Investors may finally have warmed to that message. Lanham, Md.-based Integral’s stock price spent most of 2007 in the mid- to low 20s, but has risen
steadily this year since the first day of trading Jan. 2 when it closed at $22.51 a share. After several weeks of steady gains, Integral’s price jumped from $33
a share April 28, the day the company’s second quarter financials were released, to close at $36 a share at the end
of trading May 1 on the Nasdaq over-the-counter market – close to its 52-week high of $36.77 a share.


For the period ending March 31, Integral reported total revenue of $44.8 million compared to $29 million during
the same period a year ago. For the first six months of its fiscal year, revenue was
$82 million compared to $56 million at the midway point of
Gross profit for the second quarter was $32.6 million compared to $20.3 million last year
Integral has posted a profit of $54.6 million for the first half of 2007 compared to $38.6 million during the same period last year.


In an interview in February, Integral Chief Executive Alan Baldwin
and Pete Gaffney, the company’s
executive vice president, expressed frustration that investors did not seem to value Integral’s financial strengths, noting that other
that had never turned a profit enjoyed higher stock valuations.


So Integral launched
effort to show potential investors that it
could grow while still maintaining strong profitability. “We have to be able to show a growth story,” Baldwin said. “We are serious about adding to the size of the company, but at the same time growing revenue. We still feel the market will come around to appreciate good fundamental financial results. Strong EBITDA (earnings before interest, taxes, depreciation and amortization), revenue and cash flow should be important. These are the things we do and we do them very well.”

In an interview May 2, Baldwin and Gaffney said the second quarter was
the latest of
several in which Integral had
solid financial results and reiterated that their goals remain the same.


“The investment community may be coming around,” Baldwin acknowledged.


Both executives
said Integral continues to look for acquisition targets among companies with
strong fundamentals.


“We’re looking for strategic fits of other companies that can complement our customer base,” Gaffney said. He noted that Integral
is especially interested in acquiring a company with a strong customer base in the U.S. intelligence community. The fit can be ground systems, software or analysis or all of those, he said.


Baldwin said Integral also wants to increase its business with the U.S. Defense Department, NASA, the National Oceanic and Atmospheric Administration and similar government agencies in other countries.


announced April 22 that it has hired Richard Wathen to be vice president of mergers and acquisitions. From 1999 to 2004, Wathen served as
chief financial officer for netASPx,
a $50 million managed-technology services company where he once led the selection, acquisition
and integration of nine companies in just eight months,
Integral said in a press release


Baldwin said Integral also is investing in internal research and development to improve
existing product lines and develop new ones while
increasing its business development activities and adding manpower to ensure current customers “continue to believe in us.”


As far as
international sales, Baldwin and Gaffney
said they are hopeful that promised reforms to the U.S. International Traffic in Arms Regulations (ITAR), which govern space-related exports,
might finally become reality this year.

“We think ITAR is at least headed in the right direction,” Gaffney said


Gaffney noted that while Integral would like to see jurisdiction for licensing
exports of its
product lines move from the U.S. State Department to the Commerce Department, the company has
been able to make international sales under the current
export regime. “We’ve been able to sell into every country except China, and I don’t see them making changes so drastic that we can sell into China,” he said.


Baldwin said shifting export jurisdiction for satellite equipment back to Commerce – where it was up until 1999, would be a boon to U.S. companies.

“We’re hopeful and at the same time we are kind of waiting to see what the changes will actually be and how meaningful they are,” Baldwin said.

Comments: lrains@space.com