I was on the conference call. The call was pretty positive. The negatives were weaker indirect and channel sales (4% versus 22%), and a continued need to sell solutions/applications instead of just the technology. Taxes were higher than expected and they still beat earnings estimates, also approximately $3 million of deferred revenue was added, most of this from WorldCom, which helps out for future quarters.
The real problem was a later conference call between the CFO and sell side analysts (which I was not on). The CFO guided down estimates to approximately 20% growth in revenue, and declining earning due to investments in R&D and sales force. This resulted in a dramatic change in analyst numbers. It was particularly a problem since the CEO was not on the analyst call (he was on the earlier call). The analyst I talked to felt that the CFO had an almost opposite view of the business than the CEO, whom he had spoken with only a few days before. This led to speculation that the CEO had been fired. I talked with IR on Friday, and they said the CEO had not been fired and was just traveling. He is expected back on Tuesday and will talk with analysts at that time.
The way I see it, two things may be happening:
1. The CEO, like many CEOs, is too optimistic and is being correctly countered by a more realistic CFO. This may also indicate a rift in management and possible change.
2. The business is doing fine, but the CFO was trying to hold down estimates so the company has a good chance of meeting or exceeding them. Unfortunately, this process was mishandled leading to a stock plunge and continued loss of credibility with analysts.
Either way, this was bad for the company, unless it gives them more encouragement to sell in the near term. |
