SW firms blame weak quarter on lost deals

Spencer Swartz

SAN FRANCISCO: Compuware Corp. and Fair Isaac Corp. added their names to the growing list of business software companies to warn of weaker-than-expected quarterly results in the weeks ahead.

Close to 20 companies, including Siebel Systems Inc., Veritas Software Corp.,and Sybase Inc., have warned in the past two weeks that they expect weaker quarterly results because of a failure to close deals late in the quarter.

Detroit-based Compuware, which makes testing, development, and management software, warned it would miss Wall Street's quarterly earnings estimates and blamed lower-than-expected sales of new software licenses, often a barometer of future growth.

The company said it expected to break even in the quarter ended June 30 on revenue of about $286 million. Wall Street analysts on average had been expecting earnings of 2 cents per share, according to Reuters Estimates.

Minneapolis-based Fair Isaac, meanwhile, warned of weaker results than previously forecast for the June-ended and current quarters.

The company, which designs credit scoring systems for credit card companies and other lenders, said it expected earnings per share for the June quarter to be 38 cents to 40 cents, lower than the prior forecast of 40 cents to 43 cents.

Fair Isaac pegged current quarter earnings per share at between 25 cents to 27 cents, down from a previous forecast of 40 cents to 43 cents.

Analysts have pinned the software sector's warnings on a range of factors, including corporate caution over the prospect for a renewed economic slowdown in the second half of 2004.

SOFTWARE WARNINGS

Brent Thill, an analyst at Prudential Equity Group, said the barrage of warnings had hit small and big vendors across all software categories.

In a research note on Monday, Thill said Prudential rated just three companies -- Microsoft Corp. MSFT.O, SAP AG and Autodesk Inc., "overweight" out of the 12 enterprise and application software companies Prudential covers.

In a note for clients, Piper Jaffray analyst David Rudow also said U.S. companies had been spending more time and money on bringing their operations into compliance with new accounting laws, taking the focus away for now from new software investment.

Some major business software makers, like Germany's SAP, have so far escaped the recent warning trend, and some analysts have said that underscored success in winning market share from smaller vendors.

Analysts have this is a function of companies buying more software from one large vendor in a bid to make it easier and cheaper to integrate a range of programs for functions such as human resources, finances and tracking inventories.

SAP, the world's biggest business software provider, said it expected total second-quarter revenues to rise 9 percent from a year earlier and software revenues to rise by 15 percent.

PeopleSoft Inc., one of the world's biggest business software companies, blamed uncertainty caused by Oracle Corp.'s $7.7 hostile takeover bid for its weaker profit and revenue forecasts which it said would miss previous estimates by a wide margin.

The uncertainty has caused customers to shy away from new software deals, PeopleSoft said.

Analysts, however, said PeopleSoft's problems for the current second quarter went beyond the impact of Oracle's bid and reflected problems of integrating J.D. Edwards into PeopleSoft's operations. PeopleSoft bought J.D. Edwards last year.