Sybase warns of Q1 shortfall

LOS ANGELES: Sybase Inc., which makes database and other business software on

Tuesday warned that quarterly earnings would fall short of expectations because

of a sudden freeze in sales to US customers in the final days of March.

The Emeryville, Calif.-based company announced preliminary results for the

quarter ending March 31 showing a pro forma operating profit of between 23 cents

to 26 cents a share based on revenue of between $227 million to $231 million.

Financial analysts had expected the software provider to earn 28 cents a

share, according to investment research firm Thomson Financial/First Call.

"The fundamentals of the business remain strong, but despite our best

efforts we were not able to escape the effects of the current US economic

malaise," chief executive and chairman John Chen said in a statement.

In reaction, Sybase has clamped down on its own expenses, instituting a

hiring freeze and deferring investment on equipment and spending in other areas,

Chen told analysts. "It may be close to a perfect storm, but we think we

can weather it, period," Chen said of the downturn.

Chen said the sudden drop in sales at the end of the quarter had come across

the company's product line, but had been largely confined to the United States.

Demand in Europe has held up and Asia recorded annual growth near 20 per cent in

the quarter, he said.

Sybase expects its purchase of New Era of Networks Inc. to proceed despite

the disappointing quarter, Chen said. The company is counting on that merger to

extend its reach from its traditional strength in database applications what has

been seen as the faster-growing area of e-commerce applications.

Under the terms of the merger, which is scheduled to be completed with an

April 11 tender offer of shares, NEON common stock would be converted to 0.3878

shares of Sybase common stock. NEON closed Tuesday at $4-27/32, a 3 percent

discount to the implied merger price at the close of $5.01.

Sybase expects to announce results for the first quarter 2001 on April 19.

Sybase shares ended trading off more than 12 per cent at $12-15/16 on the Nasdaq.

The stock lost another 3 per cent after hours in the wake of the earnings

warning, slipping to $12.50 on the Island system.

(C) Reuters Limited 2001.