Vantive Corp Inc and Sterling Commerce each announced Wednesday that their quarterly results will disappoint Wall Street. Customer relationship software vendor Vantive said results for the second quarter ended June 30 will show a loss of between $0.12 and $0.14 per share, when analysts surveyed by First Call were expecting a profit of $0.04. That estimate includes a restructuring charge of roughly $0.07 per share, net of which the bottom line will still be a major disappointment. Revenue for the quarter should come in at $47m to $49m, an increase of 27% over the year-ago period, with $22m of the total derived from software licenses. Vantive shares fell as much as 30% Wednesday on the news before closing the day down $3.0938, or 24%, at $9.7188.
The charge stems from what the Santa Clara, California-based company is calling a realignment of its organizational structure, which comes as a result of newly-hired CEO Tom Thomas’ review of the company’s worldwide operations. Thomas says he aims to improve sales execution and create a flatter organization to bring management closer to customers as the company works on delivering its next-generation of web products. To that end, Vantive says it will terminate several internal programs and cut some associated staff, although it would be no more specific.
On the senior management level, the company is abolishing the position of chief operating officer to create a more direct line of accountability to the CEO. Thus, acting COO Phil Dunkelberger will be stepping down and the officers in charge of all the company’s major functions, including product development, sales, marketing, professional services, and business development, as well as the CFO, will report directly to Thomas.
Meanwhile, Sterling, the Columbus, Ohio-based business-to- business electronic commerce company, said it expects third- quarter revenues to be in the range of $152m to $153m and earnings per share of $0.38 to $0.39, just below the $0.41 consensus estimate, according to First Call. Revenue had been expected to reach $166m for the quarter. The announcement led Sterling shares down $9, or 25%, on Wednesday to close at $26.75 after trading as low as $24.50.
The company claims the quarter was impacted by delays in closing several large quarter-end product transactions, lower-than- expected growth for some products, and lower-than-expected results from the recently-acquired XcelleNet business, the latter due largely to unforeseen integration difficulties. When it came down to the wire, we had several companies that postponed their purchases, CEO Warner Blow said in a statement. The company also cited Y2K as a catalyst for the slowdown in product sales growth.
Analysts at BancBoston Robertson Stephens believe that the industry’s shift to hosted applications, as well as Y2K, have caused the biggest decline in Sterling’s results. The bank expects software sales to be weak for the remainder of the year but reckons the company will ultimately benefit from its shift to a more hosted application model. Results should continue to be mixed going forward, due to both increased competition and the move toward the internet as a more open messaging platform.
