Changes to the executive lineup at Jack Henry & Associates Inc. are raising some eyebrows among analysts who follow the company, but the provider of data processing software and services says that the moves are in line with its succession plan.
Last week the Monett, Mo., company announced that Terry Thompson, who has been its president since January 2001, will retire at yearend. Chief operating officer Jack Prim will become president effective Jan. 1 and Tony Wormington, the general manager of technology services, will take Mr. Prim's current post.
"I'm shocked," said M. Arthur Gillis, the president of Computer Based Solutions Inc., a Dallas research and consulting firm. He noted that Mr. Thompson, 51, has been in the president's job less than two years, following the resignation of Michael R. Wallace, who left "to pursue other interests," as the company said at the time.
Though Mr. Gillis expressed confidence in Mr. Prim, who has more than 25 years of experience in the industry, he said the moves seem uncharacteristic of Jack Henry, which was founded in 1976 and went public in 1985.
"That's a steady, conservative, stable company that never reacted to hype, hoopla, or fantasy," he said. "When you cast yourself as a certain type of company, a hiccup like that gets your attention."
The May issue of a newsletter Mr. Gillis publishes noted that Jack Henry had been trading at about $5 a share in April of 1997 and that it was trading at about $21 last month. The stock closed Friday at $20.19, down from $22.21 the previous week.
Jack Henry executives downplayed the timing of the management-change announcement. Both Mr. Prim and Kevin D. Williams, the company's chief financial officer and treasurer, said that Mr. Thompson had planned earlier to retire but that he agreed to stay on after Mr. Wallace's resignation.
"This is not a surprise change," Mr. Prim said. "We are announcing this seven months in advance."
In an interview Thursday, he called it "a normal, natural, planned transition" and added the "management structure is as solid and as strong as it ever has been."
The market for banking software appears to be firming after a slump. Jack Henry's business has faced difficulty for the past three quarters, especially the sale of packaged software to the community banks and credit unions that make up its customer base, said Stephen A. Laws, an analyst at W.R. Hambrecht & Co.
"A lot of banks have pushed off decisions on the purchase of in-house equipment," Mr. Laws said. As recently as March, when Jack Henry held an "analysts day" program for the Wall Street community, executives were reporting no rebound in that part of their business.
But during the quarterly earnings conference call in late April, executives reported that they had "begun to see demand for in-house solutions pick back up," Mr. Laws added. "That clearly is bullish for their business."
Mr. Prim agreed, but "it is premature to say the economy is coming back," he said. Still, "we are encouraged by what we see in the market."
By contrast, the company's outsourcing business has remained strong. Until now, the service side has been a relatively small part of Jack Henry's business, Mr. Prim said. Of the company's 2,500 financial-institution clients using Jack Henry for core processing, only about 350 were outsourcing the data processing work, while the rest bought software packages for in-house use.
Among new core-processing customers, however, as many are interested in outsourcing as in-house, he said. "It's a rapidly growing part of our business."
Mr. Prim also pointed to new initiatives, including check imaging, and developing markets such as customer relationship management. Jack Henry has invested heavily in CRM, most recently with the acquisition of Transcend Systems Group Inc. of Sioux Falls, S.D., a deal completed in January, and a partnership with Argo Data Resource Corp. of Dallas to market CRM to larger institutions.
"CRM solutions are beginning to mature," Mr. Prim said. "They are moving from the buzzword stage to the stage where they deliver actual benefits."
