Mr Fran Rooney's sudden resignation as chairman and chief executive of Baltimore Technologies "with immediate effect" should produce immediate changes. Market sources believe an early take-over is more likely.
The shares gained 6p to 25p sterling (41.25 cents) in heavy trading as investors took positions on a possible take-over later this year or early next year. On the Nasdaq, the share closed $0.25 up on $0.84, a rise of 42.37 per cent.
Observers believe the acting chief executive and current finance director, Mr Paul Sanders, will speed up restructuring and cut costs. This would make Baltimore more attractive for a trade buyer like Entrust, RSA and Verisign or a major technology company like IBM or Microsoft. They would see Baltimore's products as an add-on to their existing businesses.
But while most analysts in Dublin believe Baltimore is, in effect, a take-over waiting to happen, Davy technology analyst Mr Barry Dixon is a dissenting voice. He believes the new management will restructure by cutting probably another 250 jobs, on top of the 250 cuts already announced. He believes it would then initiate a rights issue that would provide Baltimore with enough cash to see the company through to third quarter 2002 when it is expected to be cash-positive.
"When Baltimore hit 16p, it valued the business at £30 million [€38 million] excluding its cash and that's a day at the races for the likes of Microsoft. If its technology is that attractive why didn't a buyer emerge before now?" asked the Davy analyst. He added that there would be no prospect of attracting new investors. He felt existing shareholders might be persuaded into putting in another £2530 million if it meant their existing investment in Baltimore might be secured.
But other Dublin analysts believe a take-over is the most likely option now Mr Rooney has exited. One analyst said the new management was likely to take a more dispassionate and clinical view of the business than a founder-director like Mr Rooney.
"The market will take this positively. It allows for new blood and leaves the path open for a take-over or strategic alliance," said Mr Robert Hussey, analyst at NCB Stockbrokers.
Mr Sanders, who was named interim chief executive, said he would continue with the restructuring begun by Mr Rooney. The firm had "significant" cash resources to continue its business plans, he said.
Baltimore said last Thursday it had cash reserves of around £54 million (€68.6 million) and did not need funds from the equity or debt markets. Instead, it wants to make deep cost cuts and has not ruled out asset sales or plant closures.
Mr Sanders said the restructuring had begun to take effect on the company's cash burn, which had been estimated at £24 million per quarter. "That obviously related to previous quarters before any benefit of rationalisation carried out to date or any future restructuring benefits," he said.
The group announced 250 job cuts in May in its 1,200 employee global workforce. Last week it said it would axe a significant number of additional jobs. Analysts said this could be another 250 as Baltimore sought to cope with the global downturn and decisions by major purchasers to defer or abandon purchases of Baltimore's Internet security products.
For Mr Rooney, his departure ends an extraordinary roller-coaster ride at Baltimore. From 1996 when he bought the company with backing from financier Mr Dermot Desmond, Baltimore had a stratospheric rise which saw it, at one stage last year, reach a market capitalisation of £7.5 billion sterling (bigger at the time than Bank of Ireland) and membership of the FTSE-100 index before the collapse of the dot.com sector last year.
In May last year, Mr Rooney, who will receive one year's salary - £262,000 sterling (€432,343) - in compensation for loss of office, realised £5.8 million sterling when he sold one million shares at 580p each. While he is sitting on sizeable profits from that particular deal, Mr Rooney is nursing a hefty loss from another trade in Baltimore when he bought 607,000 shares last December at an option price of 150p sterling.
Mr Rooney says he will "pursue other interests" including being chairman of an e-learning company.
