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Single-minded Featured

6:43am EDT August 31, 2004
It had been a great couple days for Art Rhein, CEO of Agilysys, and he proudly ticks off the latest company news.

"This is the third quarter we were able to announce results that exceeded expectations that the Street had set," he says. "We upgraded our guidance for the year by 20 percent."

Agilysys had projected fiscal 2005 sales to grow from 13 percent to 18 percent within an industry expected to grow by 6 percent to 8 percent in terms of IT spending.

"We are now projecting 20 to 25 percent growth for the year," he says. "And, we had 38 percent growth (for the first quarter) year over year."

The good news comes not long after a period of strong sales but declining profits. In 2002, Agilysys, then Pioneer-Standard, posted a net income loss of $7 million, followed by a loss of $42.1 million the next year. By fiscal 2004, however, Rhein, who became CEO in April 2002, had righted the ship. The company posted a profit of $8.7 million on sales of $1.4 billion.

"This past year, we earned 31 cents per share. We were projecting 70 to 80 cents per share (for fiscal 2005)," he says. "Now, we're looking at between 83 and 93 cents per share, so we're seeing earnings go up significantly."

The turnaround began when Rhein was named CEO and set out to reshape the billion-dollar business. He and his board of directors analyzed the market segments Agilysys operated within and determined the computer systems and solutions business enjoyed a much stronger market position in a more stable industry with better growth opportunities than the company's components distribution business.

In January 2003, it divested its electronic components distribution business, raising $240 million in cash. In August, it changed its name to Agilysys, a combination of the words "agile" and "systems," to better reflect the new focus.

Rhein followed with two acquisitions -- Kryus Corp., which makes proprietary software for checkout and inventory control systems used in grocery chains; and Inter-American Data Inc., which designs hotel and resorts software used to track customer transactions.

Bolstered by the acquisitions, Agilysys is a new company.

Explains Rhein, "We've moved from providing mission-critical hardware, which was available from multiple sources, to providing mission-critical applications, and those are available only from us. We've acquired or developed intellectual assets that provide a compelling value proposition we needed and have a bit of a moat around them as a barrier to entry for competitors." HOW TO REACH: Agilysys, (440) 720-8550 or www.agilysys.com