Quality Systems Is Urged to Spend Cash on Buyback

A San Francisco investment group and affiliates have urged Quality Systems Inc. to approve a large stock buyback plan to bolster the company’s sagging shares.

The request came from Lawndale Capital Management LLC and affiliates, which own a 6.2% stake in Quality Systems, a Tustin-based provider of computer management systems for medical and dental practices, according to documents filed Wednesday with the Securities and Exchange Commission.

Quality Systems’ shares fell 13 cents to $6.13. The shares have fallen 33% since reaching a 52-week high of $9.13 on Oct. 30.

In addition to a share buyback, the company should pursue possible acquisitions, according to Andrew E. Shapiro, founder and president of Lawndale.

“They’re sitting on $3 a share of cash, with no debt,” Shapiro said. “Cash doesn’t earn a high rate of return. If they have a better use of the cash than the retirement of cheap stock, I’m all for it.”

The company’s combined assets are worth about $10 to $12 a share, Shapiro said.

Robert McGraw, the company’s chief financial officer, declined to comment.

This is the second time the investment firm, with $15 million under management, has acquired a stake in Quality Systems. In 1995, the firm bought a large block of the stock for about $350,000 on Valentine’s Day and cashed in later in the year for $3.5 million.