iSoft interims: HY ending 31 October 2006

Anyone reading and believing the AFX news wire interpretation (written by Simon Duke and the first off the press I have seen) of these results should be forgiven if they think the end is nigh. Mr Duke appears to have a short interest in the shares given his choice to rehash old shock and awe language regarding the dangers of bankruptcy; and to mention only the exceptional operating costs and not the related exceptional credits in his article. Ah, well.

Despite this scribe retaining a long interest, here is a more balanced appraisal for those who appreciate the iSoft context. These results are operationally impressive (break-even post-exceptionals) for a firm faced with overwhelming bad press and in the midst of wrestling with the previous regime's accounting cash hole. Cost cutting is ahead of schedule; and, for a firm who Mr Duke and many others doubt as viable, it has mitigated the top-line impact of its plight well.

The balance sheet is still very weak (expected) with the new financial borrowing facilities heavily drawn (ditto); and cash outflow is large but not as large as feared. It is even perversely encouraging.

Philips, or whoever is supposed to be studying a tie-up with iSoft but didn't want to talk about it today, certainly ought to be encouraged. iSoft will ultimately stand or fall on its products (notably Lorenzo) but a pre-condition is a sound financial structure. Going-concern fixations in the vein of Mr Duke's are lagging indicators and do not do justice to the operational progress made in part by Bill Henry's hiring (a step it appears many iSoft watchers may not have fully appreciated) or the financial rebuilding taking place under Mr Weston. They ignore, too, the importance of the large recurring revenue element of iSoft's substantial install base.

None of which is not to deny that the firm remains on a knife-edge in funding terms. But context should still count for something; and so far this morning the share price agrees with that approach.