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January 28, 1998

THE INCREDIBLY SHRINKING SYBASE LOSES MORE MONEY

By CBR Staff Writer

As promised, Sybase Inc finally released its downwardly-revised fourth quarter and full fiscal 1997 results Wednesday, a week after their dramatic postponement following the uncovering of irregularities at its Japanese subsidiary which meant that the company needed to re-jig its numbers (CI No 3,331). The company has reported a net loss for the year of $55.4m, or $0.70 per share on both basic and dilutive bases, on full year revenues, which include restated first, second, and third quarters, of $903.9m. This time last year Sybase reported full year sales of $1.01bn and net loss of $79.0m. The reduction reduces revenue from January to September by the order of $43m, less than the $60m -$65m of illegally booked revenue the company had been warning about. In the fourth quarter Sybase saw revenues of $223.2m and net loss of $25.5m, when it had been predicting sales between $245m-$250m in its early January pre-announcement and profits warning. The final figure comes in well below hopeful analysts’ predictions of $264m for the period. The news does include some ominous signs, albeit that the loss was less than it might have been. Overall, though, software licenses fell 22% year on year, with database sales slipping 19% and perhaps more worryingly, given Sybase’s shift from being a core merchant database company to it trying to be being a middleware and software development tools player, tools were down 30% for the year, though the company says the latter grew third to fourth quarter by 12% sequentially. (All figures are subject to negative currency impacts.) Chief executive officer Mitch Kertzman announced that in light of the results, the company will cut headcount later in the quarter, in order to bring revenue and expenses into shape to ensure profitability. As for actual growth for the outfit, Kertzman seems to be pushing that out beyond 1998, with profitability being seen as the target for this year. Given that Sybase is now smaller than it has been for three years – sales grew from $956.6m to $1.01bn between 1995 and 1996 – in what is still seen as a strong database market, the trend is not encouraging. The cull of staff is likely to be in non-customer facing sections of the company such as administration, he added. One of the few positives is that Sybase’s cash reserve now stands at $246m. Meantime, the number of class action suits filed against the company in the week since the Japanese news stands at at least seven.

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