Sterling Software Inc met lowered Wall Street expectations for its fourth quarter as the company posted what it claims is its 44th consecutive quarter of revenue and earnings growth, excluding one-time items. The Dallas-based provider of application development and systems management software and services reported net income up 10% at $41.3m on revenue up 19.6% at $230.4m. Earnings per share rose 9% to $0.47, matching the consensus estimate of analysts surveyed by First Call.
On an actual basis, including restructuring and acquisition- related charges totaling $117.3m, the company posted a net loss of $59.4m. In the year-ago quarter, net income was $7.6m, or $0.09 per share after $45.2m in similar charges. For the full year, Sterling posted an actual net loss of $10.8m on revenue up 12.1% at $807m, compared to net income of $76m, or $0.89 per share, last year. Excluding $183.2m in charges, net income for the year was up 36% at $143.7m, or $1.64 per share.
In September, Sterling warned that fourth-quarter results would be hit hard by costs related to its recent $168m acquisition of Information Advantage Inc. At that time, the company gave analysts the new guidance of $0.47 when they had previously been expecting $0.52 per share in earnings. Sterling said a restructuring of its application management business to integrate the acquisition hurt its revenue in this area – which accounts for about half of total revenue.
Sterling said its systems management business saw fourth-quarter revenue jump 70% to $105.5m, up from $62.2m in the year-ago quarter of 1998. Systems management contributed $46.8m to the quarter’s operating profit, with margins of 44%, up from 41% last year. The federal systems business, meanwhile, booked revenue of $40.9m, down from $42m in the fourth quarter of 1998, and contributed $3.3m in operating profit for the quarter. Application management revenue slipped 5% to $84m, due primarily to a 29% decline in services revenue, which was partially offset by 16% product revenue growth. The segment contributed $13.5m in operating profit to the quarter’s results.
