Integral Systems: Back on trajectory

Based on recent contracts that Integral Systems Inc. (Nasdaq:ISYS) has won, the company seems poised for upward trajectory, but this wasn’t always the case. The supplier of satellite ground systems suffered from several problems and scandals a year ago, and by January 2007, the Lanham, Md. company faced opposition from its largest shareholder, Fursa Alternative Strategies, which owned 12% of the company’s stock.

Fursa thought the company was on the wrong trajectory. Integral Systems had some shaky times under previous management. Its CEO resigned in April 2006 for sexual misconduct involving a minor (and later pleaded guilty to a misdemeanor in exchange for probation and counseling), but was kept on as a consultant, continuing to draw a salary. The former CEO’s hand-picked successor lasted just a year before resigning as CEO and board member to become EVP for New Business and Technology Development.

Then in March 2007, the company learned that the Securities & Exchange Commission had issued a formal order of investigation over the role played by a company consultant, Gary A. Prince, who became a company EVP in August 2006. The SEC was investigating whether he had been a de-facto executive before that time, and whether he was acting as an accountant before the SEC after becoming an employee at Integral. He had been permanently barred from such activity in 1997 by the SEC because of activity while working at Financial News Network and United Press International. Prince was fired on March 30, 2007, but still managed to get back pay and legal fees from Integral.

The stock retreated from about $33 in September 2006 to about $22 the following March as company growth slowed. Throughout all this turmoil, revenues and profits had also suffered, rising just 10% and 4%, respectively, in fiscal 2007. Still, . . .

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