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Totvs Eyes Acquisitions as Brazil Software Market May Expand 10%

Totvs SA plans to buy specialist information technology companies to attract small and medium-sized clients as it bets Brazil’s software market will expand as much as 10 percent this year, according to Chief Executive Officer Laercio Cosentino.

“We want to be the best software-house option for foreign companies arriving in Brazil and also for Brazilian companies doing business outside the country,” Cosentino said in a Feb. 14 interview in Sao Paulo. “There is still a lot of space to grow.”

Sao Paulo-based Totvs, Latin America’s biggest maker of business-management software, aims to acquire small IT computer program providers that target specific market niches, Cosentino said, without naming particular industries. The company signed a contract in January with Officer Distribuidora de Produtos de Informatica SA to sell products targeted at small and medium-sized businesses in Officer’s 12,000 retail outlets.

Only 15 percent of small and medium-sized companies in Brazil, with between 10 and 499 employees, own a business-management IT system, according to research firm Gartner Group Inc.

There are 4.6 million companies with less than 10 employees without management software, Cosentino said. Small and medium-sized companies in Brazil are likely to grow 10 percent this year, the same rate as the software industry, compared with gross domestic product growth of 4 percent, he added said.

Totvs currently has 26,000 clients, of which 700 are outside Brazil. The company would finance acquisitions from its own cash flow or with loans, Cosentino said.

The company posted a record profit of 60 million reais ($35 million) in the fourth quarter, as debt plummeted to 53 million reais from a peak of 282 million reais at the end of 2008 after its takeover of Datasul SA.

Totvs shares have risen 5.5 percent since its quarterly earnings were released on Jan. 31 through yesterday. That compares with a 4.9 percent increase for Brazil’s benchmark Bovespa stock index in the same period.

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