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Constituent Review
J. Andrew Braswell, Equity Analyst Newbridge Institutional Research Data as of 3-30-07	Quote/News
	Nanotech Tools

Review
1/3/07- ACCL announced that Materials Studio® 4.1 is now integrated with the Cambridge Structural Database (CSD), a principal product of the Cambridge Crystallographic Centre (CCDC). MS 4.1 users will now be able to initiate searches of the CSD, gaining access to information such as atomic coordinates relating to more than 400,000 crystal structures. Queries prepared in MS can also be transferred into CDCC’s ConQuest interface, with post-search analysis performed on either platform.

1/4/07- In an 8-K filed today, ACCL announced that it will close its R&D facility in Bangalore, India, and terminate approximately 60 employees there. According to the company, the programmers are no longer required following the recently completed modernization of legacy software platforms. The consolidation is expected to be completed in the March quarter (Q4FY07), and to result in $0.7M-$0.9M of severance and facility closure costs. Combined with the headcount reductions in March 2006, we estimate that ACCL’s workforce has been cut by 20%, and that total headcount is now around 400. No details on potential cost savings of the current restructuring were provided.

1/22/07- Announced the release of a new Imaging Collection for its SciTegic Pipeline Pilot™. This software integrates image data with numerical, chemical, graphical and textual data in a cohesive framework. Imaging tools allow users to segment images and to identify, label and annotate objects. Analytical applications support microscopy, high-content screening, tissue analysis and microarray analysis.

2/1/07- Reported results for the December quarter, its fiscal Q3, after the close. Revenue for the quarter was $20.7M, a Y/Y increase of 1%, slightly below our $20.9M estimate. Gross margin was 78.1%, down Y/Y from 78.7% and significantly weaker than our projection of 81.2%. Total operating expense was $17.4M (+1% Y/Y), or $16.4M (-5% Y/Y) excluding options expense. The net loss on a GAAP basis was $1.1M, or $0.04 per share, compared to the GAAP net loss of $567K, or $0.02 in Q3FY06. Excluding restructuring costs, the net loss was $829K, or $0.03 per share, compared to our estimate for net income of $305K, or $0.01 per share. ACCL ended the period with $60.0 million in cash and $55.5 million in deferred revenue.

2/1/07- Said that it had formed an Enterprise Cheminformatics Consortium and signed Pfizer as the fist member. This will follow a similar model to the other ACCL consortia with a three-year duration, and will seek 10-12 members. 2/5/07- We released an updated report on ACCL, maintaining our Buy rating but lowering our price target from $9 to $8 in light of revenue growth trending below expectations.

Commentary
Shares of ACCL moved slowly, albeit steadily higher through Q1 for a 6% gain, regaining some ground lost in 2006 (-25%). While closer to our projections in the December quarter, revenue growth has continued to disappoint, and the string of incremental gross margin improvements came to an end. Backing out options expense, the company was able to cut operating expenses by 4% Y/Y. We may see some additional improvement there by virtue of the shuttering of the Bangalore development center, but management cautioned that those savings would be partially offset by added headcount at its San Diego and Cambridge facilities. We introduced our estimates for FY08 (ending 3/08), including revenue of $88.1M (+8% Y/Y), gross margin of 79.5% and net income of $2.9M, or $0.11 per share. We lowered our price target from $9 to $8, which reflects a 2.8x price/sales multiple to our FY08 projection.