Bloomberg News
April 5, 1999, 12:58 p.m. PT
Axent Expects 1st-Qtr Loss; Companies Delaying Orders (Update4)
(Updates stock activity, adds company comment in 6th-7th,
14th paragraphs.)
Rockville, Maryland, April 5 (Bloomberg) -- Axent
Technologies Inc., which sells computer-security software, warned
of a first-quarter loss on weak demand as companies focus on the
Year 2000 problem, pushing its shares down as much as 61 percent.
Axent expects a loss from operations of 5 cents to 10 cents
a share. It was expected to earn 18 cents, the average estimate
of analysts surveyed by First Call Corp. The company had profit
from continuing operations of 12 cents in the year-ago quarter.
Axent fell 12 1/32 to 7 31/32 in late trading, after earlier
touching 7 3/4.
Axent joins Oracle Corp., PeopleSoft Inc. and other software
companies in saying that customers are delaying purchases, in
part to fix older computers that could malfunction at the turn of
the millennium. Axent predicts the slowdown will continue for
several quarters, resulting in break-even earnings for this year,
well below profit estimates of $1.04 a share.
''We are seeing this across the board,'' said David Hilal,
an analyst at Friedman, Billings, Ramsey. ''It's not a one-
quarter phenomenon.''
Hilal, who is reviewing his ''buy'' rating on Axent,
expected the company to earn 17 cents in the first quarter.
Axent told analysts on a conference call that 12 to 18 sales
in Europe and the U.S. worth $10 million to $15 million fell
through during the quarter. Sales to financial institutions that
weren't completed accounted for about half of the shortfall.
The company reduced its forecast for revenue increases from
40 percent to between 20 percent and 30 percent.
Last month, Oracle, the No. 1 database software maker, said
third-quarter revenue was below analysts' estimates because of
slowing sales as companies concentrate on getting their computers
ready for the Year 2000. That's delaying spending on sales of
business application programs.
Some computers are expected to malfunction because of a
programming error that causes them to read the year 2000 as 1900.
''Companies don't want to deploy any new applications with
their existing systems until they feel comfortable,'' said Kama
Krishna, an analyst with Laidlaw Equities, who has a ''hold''
rating. ''It's basically a wait and watch issue.''
Revenue Estimates
Analysts expect that software makers will continue to be
hurt as businesses scale back purchases to ensure their computers
will work at the turn of the century.
''The effects of Y2K are extremely devastating to a lot of
software companies,'' said Hilal. ''This certainly won't be the
last'' software company to issue first-quarter profit warnings,
he said.
Some analysts were hoping that demand for security software
among companies selling goods over the Internet would offset
weakness because of the Year 2000 problem. Today's announcement
from Axent also pushed down the shares of software maker Check
Point Software Technologies Ltd., which fell 10 5/8 to 28 7/8.
''We believe this is impacting other companies as well,
including those in the security space,'' Axent Chief Executive
John Becker said on the conference call.
Axent said first-quarter revenue is expected to be $20
million to $22 million, compared with the $20.3 million reported
a year ago. For 1999, the company expects revenue of $120 million
to $130 million. That's below analysts' expectations of 1999
revenue of $140 million to $150 million.
For 1998, Axent had revenue of $101 million.
''We have experienced unanticipated delays with a number of
enterprise orders for a variety of reasons including the shifting
of customer budgets and spending to year 2000 and other
issues,'' Becker said.
Axent shares have slumped about 76 percent since Tuesday.
The Rockville, Maryland-based company expects to take a
first-quarter charge for its acquisitions of Internet Tools and
PassGo.
Axent said it will release first-quarter results April 29.
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