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MICROS Systems, Inc 18Month Transition Should Mitigate Risk

Monday morning, December 3, Micros Systems announced a chief executive officer succession plan that will take effect on January 2, 2013. Chief Executive Officer A.L. “Tom” Giannopoulos, who has served as CEO since 1993, will step down and be replaced by Peter Altabef, past president and CEO of Perot Systems, which was eventually acquired by Dell (Dell $10.33). The succession plan states that Mr. Giannopoulos will carry out the remainder of his employment contract, through June 30, 2014, as executive chairman of the company.

Although the transition looks to be quick, we believe that Mr. Giannopoulos’s presence as executive chairman until mid‐2014 will provide Mr. Altabef with the appropriate transition support and help him maintain the strong customer relationships that Mr. Giannopoulos has built. The succession plan also stated that once Mr. Giannopoulos retires, the board will appoint a nonexecutive independent chairperson. In conjunction with his appointment as CEO, Mr. Altabef will be appointed as a director on the board, effective January 2, 2013.

Mr. Altabef served as president and CEO of Perot Systems from 2004 until 2009, when Perot Systems was purchased by Dell. After the acquisition, Mr. Altabef served as president of Dell Services until his departure in 2011. We are pleased with the appointment of Mr. Altabef since he has had previous experience running large service organizations. We believe that Mr. Altabef is a strong fit for Micros since the company is increasing its focus on services and transitioning much of its products to SaaS and cloudbased offerings. Therefore, Mr. Altabef should provide additional insight and experience with these areas. Although we worry about his lack of knowledge in the restaurant industry, we believe that Mr. Giannopoulos’s additional ransition time and strong customer relationships should help provide him with the appropriate understanding

We remain quite positive on the longer‐term prospects for this business: a formidable market position, a solid growth pportunity, an experienced management team, a healthy balance sheet with more than $7 per share in cash and investments, and solid cash flow. We also note that management has increased EPS each year since 2003, and fiscal 2013 will likely represent a record year in earnings, despite top‐line growth that is well below peak levels. Given that we have begun to witness some improvement in macroeconomic trends, we believe that the company should outperform the broader technology markets over the next 12 months.

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