Rating: MARKET PERF.
Change: None
12-Mo. Target: $NA
Harbinger reported Q299 results in-line with its June 10th positive pre-announcement. Revenues
of $38.7 million (up 16% q/q, 17% yr/yr) came in 6% above our original $36.6 million estimate
and just above the 15% pre-announced growth range. Fully-taxed operating EPS of $0.08
(excluding one-time gains and charges) came in $0.02 above our $0.06 estimate and a penny
above the original consensus, but below the $0.10 reported last year. The company is now
emerging from a period characterized by multiple, simultaneous transitions (product
rationalization, associated reorganization, retooling and training, and redeployment around a
completely new IT infrastructure, etc.) which is mostly, but not entirely complete, and can make
for an unexpectedly elongated transition. We also remain cautious about the potential impact of
Y2K on adoption of e-commerce solutions by mid-to-smaller-sized organizations (Harbinger's
bread and butter), a notion which, while not new, was shared by management on its conference
call yesterday. We believe these factors, combined, within in the context of a number of recent
earnings shortfalls by competitors, highlights the potential risk to street estimates. Finally, the
bulk of this year's investment in Harbinger.net is slated to occur in the second half of the year,
padding Harbinger's cost structure in a potentially transitionary period.
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