Software shares take a hit after warnings

Ilaina Jonas and Lisa Baertlein

NEW YORK/PALO ALTO: Shares of several software companies tanked on Wednesday,

after warning that they would not meet Wall Street's expectations or their own

guidance because of prolonged, anemic spending on technology products.

Software shops that target the telecommunications sector were walloped after

wireless software maker Openwave Systems Inc. said its per-share loss would be

about twice what it had expected.

Openwave shares, which dropped to an all-time low of $1.86 during the

session, ended down 57 per cent at $2. The stock was the biggest percentage

loser on Nasdaq and among the most actively traded issues on the beleaguered

exchange.

Several research firms cut their ratings, including Merrill Lynch, which

slashed Openwave to a "reduce/sell" from a "neutral" rating.

Aspen Technology Inc. -- which saw its stock shed 52 per cent to land at $3.40

during regular trade -- slipped to $3.33 on Instinet following the

business-to-business software shop's after-hours warning that it would post a

quarterly loss on weaker-than-expected revenue.

Shares of Kana Software Inc. lost 39 per cent of their value, one day after

the maker of online customer service software said its would have a

second-quarter net loss of up to $30 million on total revenue that was more than

one-third lower analysts' average forecast of $25.77 million.

Kana's stock finished at $2.18, after bouncing off a new 52-week low of

$2.05.

Economy puts pressure on sector



Business-to-business software maker i2 Technologies Inc. Tuesday said it could
post a unexpectedly large net loss that could reach nearly $800 million. The

former Wall Street darling also said it would again cut jobs after trimming a

quarter of its work force in the past 18 months.

I2's stock ended the trading day unchanged at $1.50 after reaching a new low

of $1.16 earlier in the session. The stock is down almost 91 per cent from a

year ago. Questioning i2's ability to survive, UBS Warburg cut its rating on the

shares to a "sell" from a "hold."

I2 also helped to drag down rival Manugistics Group Inc., which also said

that one of its former officials had pleaded guilty on Wednesday to insider

trading. Manugistics' stock finished the day 15 per cent lower at $4.82.

"The current economic climate continues to put pressure on the software

group as a whole, especially the packaged application vendors who have

historically relied on large deals with 12-plus months implementation times to

demonstrate a return on investment," Merrill Lynch analyst Chris Shilakes

wrote in a research note.

Elsewhere, integration software maker SeeBeyond Technology Corp. shook

investors with word it would post a second-quarter loss -- instead of the profit

analysts had anticipated. Its shares fell 17 per cent to $2.11.

Bouncing off bad news



Nevertheless, a handful of companies managed to eke out gains after going
public with bad news. The stock of database software maker Sybase Inc. climbed

nearly 8 per cent to $10.10 on Wednesday, despite warning that it would miss

analysts' revenue forecast by about 3 per cent.

Shares of Compuware Corp. -- which lost nearly 20 per cent Tuesday on fears

the company would warn -- gained a modest 2 per cent on Wednesday after the

mainframe software maker said its results would fall short of its own guidance.

Micromuse Inc., which makes software that helps telecommunications providers

monitor their networks, watched its stock inch two cents higher to $4.06 a day

after warning that pro forma profits would be smaller than forecast.

E.piphany, the once high-flying seller of Internet-based marketing and

customer-service software, also saw its shares move higher after warning Tuesday

that its second-quarter revenues would be lower than expected after software

sales tumbled 60 per cent year-on-year.

Shares of the cash-rich company gained more than 7 per cent to $3.86, but

remain miles off their all-time high of $183.33. A handful of analysts told

Reuters that they're expecting second-quarter results to force Wall Street to

bring software company estimates down to more realistic levels.

Patrick Walravens, an analyst at Jolson Merchant Partners in San Francisco,

said just over half of the software customers he recently surveyed expect

second-half spending to be flat from the first part of the year. "Where the

disconnect occurs is that Wall Street estimates for the second half are not flat

... They're getting there," he said.

(C) Reuters Limited.