Shares in Verity Inc, the Sunnyvale, California provider of web- based knowledge retrieval software, tanked Wednesday after the company reported second-quarter net income down 34.9% year-over- year at $1.5m on revenue up 9.9% at $16.7m. Earnings per share for the quarter dropped 50% to $0.03, after being adjusted for a recent stock split, when analysts surveyed by First call were expecting $0.12.
Following the announcement, Verity stock plunged 22.875, or 47%, to close at $26.125. The massive sell-off led to a total volume of 22.7 million shares that changed hands in the session, compared to an average daily volume of 400,000. The company’s market capitalization was essentially halved to $782m.
The company said the poor performance came largely as a result of a delay in closing three large transactions, rather than any lessening in demand for its products or services. Two of the three transactions that did not close have now been closed, Verity said, and it claims to be still working on the third.
Software product revenues, which represented 60% of total revenues for the second quarter, were $10.1m, down 12% from the same period last year. Compared to the prior quarter ended August 31, second-quarter revenues decreased 15% from $19.8m and software product revenues decreased 30% from $14.5m.
For the six-month period, net income rose 85% to $6.7m on revenue up 28.3% at $24.6m, while earnings per share rose 42.9% to $0.40, before the share split. Analysts are expecting a profit of $0.13 per share next quarter. á
