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November 22, 1998

BEA PUNISHED AFTER TAKING ANALYSTS BY SURPRISE

By CBR Staff Writer

BEA Systems Inc, which warned of several problems that will constrict near-term revenue growth in reporting its third-quarter results, had its stock downgraded by five major investment banks Friday. The shares were given the cold shoulder by BT Alex Brown, BancBoston Robertson Stephens, Credit Suisse First Boston, Goldman Sachs and Piper Jaffray. The company has cautioned its followers that the current economic climate has led to customer hesitation and a lower pipeline-to-revenue conversion rate by its sales team. Analyst Wendell Laidley at CSFB says the problems came as a major surprise to both analysts and investors, especially after the bank had spoken with BEA management only two weeks prior to the end of the quarter. Laidley reckons the mistake the company made that put it in its current position was in not factoring down its pipeline in anticipation of a worsening sales environment. CSFB responded to the news by revising its fourth quarter earnings estimate from $0.08 to $0.03 and its estimate for next year from $0.54 down to $0.24. In downgrading the stock from strong buy to buy, CSFB also reduced its price target from $32 to $17. BEA shares fell 50% on Friday, to close at $13.31.

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