Interwoven Beats Q3 Views; Q4 Outlook In Line
Investor's Business Daily
biz.yahoo.com
Thursday October 23, 6:30 pm ET
J. Bonasia
Small-cap software maker Interwoven defied the gloomy tech market Thursday, beating analysts' third-quarter sales and earnings forecasts even as rivals struggle.
Interwoven (NasdaqGM:IWOV), which makes software to help customers manage Web site content and digital records, earned 18 cents a share,minus special items, for the quarter ended September 30. That's 13% over last year and a penny over the average estimate of analysts polled by Thomson Reuters.
Sales rose nearly 19% to $65.9 million, slightly over views.
Shares, which had fallen 5% in regular trading, remained unchanged after hours at 12.12.
Though Interwoven has performed relatively well in a dismal climate for software, the stock is down 14% on the year.
For the current fourth quarter, the company forecasts sales between $69 million and $71 million, and diluted earnings of 18 to 20 cents per share. Both estimates were in line with analyst views.
On Oct. 2, Interwoven surprised Wall Street by raising its third-quarter sales estimate about 2% to a range of $65 million to $66 million.
A day later, Interwoven's direct rival Vignette (NasdaqGM:VIGN) lowered its revenue guidance for the third quarter.
Interwoven's sales pipeline continues to look strong despite the economy's broader malaise, says CEO Joe Cowan.
The company is holding up by sticking to its strategy of serving niche markets: legal teams and online marketers who manage Web sales.
"We sell software that allows lawyers to be a lot more efficient and effective in how they manage their cases and clients," Cowan said. "On the other side, we help to optimize Web sites, and that's where people are spending their money."
Those two markets continue to buy software despite the downturn because Web sites still have to sell goods and lawyers still need to manage cases, says Mark Schappel of the Benchmark Co.
"Interwoven is doing very well because they're in a space that continues to spend in this difficult market," Schappel said. He has a buy rating on the stock, in part because he says Cowan heads a "first-rate" management team.
"Joe is bringing more focus to their strategy for balancing the Web and legal sides of the business," Schappel said.
Shares of Interwoven are undervalued, says Barbara Coffey of Kaufman Bros. Equity Research. She also rates the stock a buy, with a price target of 17 per share.
Interwoven's growth is largely due to its expertise in helping large global companies such as FedEx (NYSE:FDX) and Delta Airlines (NYSE:DAL) manage complex Web sites, Coffey says.
"Interwoven software addresses mission-critical needs, which are the last things to get cut," she said. "Such large Web sites can't go down because they are how these big companies make their money."
Yet Coffey warns that the content management market is "very competitive," especially as Microsoft pushes further into the field with its Sharepoint 16roduct line.
Some market watchers say Interwoven may be benefiting from investor speculation.
The company could be an acquisition target for large business software makers such as Oracle (NasdaqGS:ORCL), SAP (NYSE:SAP) or Microsoft (NasdaqGS:MSFT). But Cowan says his company isn't seeking a suitor.
Several other prominent content management software firms were acquired in recent years. EMC (NYSE:EMC) got Documentum in late 2003, and IBM (NYSE:IBM) acquired FileNet in 2006. The content management firms Open Text (NasdaqGS:OTEX - News) and Hummingbird merged in 2006.
Interwoven stock has "held up quite well in this environment," says Derrick Wood of Pacific Growth Equities, who also rates the stock a buy.
"Their execution has been pretty solid," Wood said, citing "fairly stable" sales, especially in retail, an industry that is struggling. |
