ISSCO, $6.5 Million on Hand, Reportedly Seeks Acquisitions

Armed with $6.5 million in cash from last week’s public stock offering, Integrated Software Systems Corp. (ISSCO) is now aggressively looking for acquisitions, according to analysts who follow the company.

The Sorrento Valley-based developer of computer software used to produce graphics displays sold 300,000 new shares of stock in just a few hours last Thursday. The shares sold for $22.75 each, nearly $7 higher than in a initial public offering in March, 1983.

Integrated said that its latest offering was to raise funds for “possible acquisitions of software companies and products,” as well as for working capital. But beyond that boiler-plate statement in its prospectus, the company has chosen not to expand on the nature or extent of its search for acquisitions.

“They’re looking pretty aggressively,” said Gary Smaby, a securities analyst with Piper Jaffray Hopwood Inc. “And the more money you have, the more companies you can look at.”

Building on Client Base

Smaby and other analysts believe that the firm is looking for a company with software products that will allow it to make greater use of its existing client base. “They are looking for a product that is an extension of graphics or that uses graphics,” Smaby said.

He said that Integrated is likely looking at a list of about 50 companies “which would be logical targets.” That list could expand as the software industry continues to consolidate and venture capitalists flee to less risky fields.

“Venture capitalists have dropped out of the (software) market,” one analyst said. “And a public offering at this point is out of the question. So more and more of these companies will be looking for a partnership or merger with a larger company.”

In either case, analysts said the latest ISSCO stock sale could increase institutional interest by improving the company’s “float,” the number of shares actively traded. They said that institutions often have difficulty trading large blocks of ISSCO shares without disturbing the market because of the thin float.

In addition to the 300,000 shares sold by Integrated, several insiders--including the firm’s founder and chairman, Peter Preuss--collectively sold an additional 471,940 shares.

In all, ISSCO had 5.2 million shares of stock outstanding before last week’s offering. Preuss continues to hold about 32% of the company’s shares.