The Ottawa-based company said that second quarter diluted profits are likely to top its July 21 forecast of 16 to 20 cents EPS and that revenue will come in at $228m, which is the high-end of previous guidance. License revenue, something the company has been struggling with recently, is expected to range between $77m to $78m.
Cognos did not offer any updated guidance on profit estimates. But Wall Street is expecting 25 cents EPS for the quarter on revenue of $226.1m.
But around 210 jobs are expected to go as the company looks to shave its expenses by $28m annually. Cognos CFO Tom Manley framed the cuts as part operating margin expansion plan.
The company said it immediately expects to save around $13m in the second half of 2007.
According to Cognos most of the cuts will be made across the company’s upper and mid management tiers.
But the company also plans to strengthen its customer facing organization by hiring around 20 to 25 new sales and professional personnel by the end of this year.
Cognos expects to take a pre-tax charge of $27m in the third quarter as a consequence of its workforce restructuring.
This was a very solid quarter for us, said CEO Rob Ashe in a conference call with investors yesterday, but admitted that license revenue was a little below expectations.
There’s ample opportunity to perform better with several large deals in play in late in the quarter. These deals remain in play as we start Q3 and confidence in license opportunity remains high.
Commenting on the job cuts, Ashe said: It’s a difficult decision…but I’m confident that it’s a right move for us right now… It will touch many areas of our business but is focused primarily on management and non revenue generating positions.
Ashe said the company is eliminating 20% of the vice president positions in the company.
Ashe has a far from smooth ride since he took over at the helm in mid-2004, recently grappling with several underperforming quarters, a dampening effect of the Canadian dollar strength over the last two years, not to mention delayed SEC filings as a result of an internal probe into revenue recognition policies.
If anything the raised second quarter estimates will be a welcome relief for a long-time high flier in the BI space that has recently bumped back to earth following a rocky transition period from older to newer BI platforms.
The company reported a sharp drop in first quarter profits in July as a result of higher costs and operating expenses. Poor sales execution in the field, particularly a failure to close enough large deals, has been a major stumbling block and its no coincidence that Cognos is shoring up its 350-strong sales division.
Cognos will report its second quarter earnings on September 21.
