Edge, See the article below (Nov. 19), at least the CEO is trying to correct the problems.
Regards,
Tom
TriTeal CEO Vows To Use Strong Software Pdts To Boost Sales
By MARIA V. GEORGIANIS
Dow Jones Newswires
NEW YORK -- TriTeal Corp. (TEAL) is working to prevent a major
revenue shortfalls like the one that caused a record-setting quarterly loss and
triggered two shareholder lawsuits.
With the company's stock plunging to a 52-week low of 2 1/4 Wednesday
from its former high of 23 1/4 on Jan. 8, TriTeal hopes it can restore Wall
Street's confidence.
Chief Executive Jeff Witous told Dow Jones that the software company in
early December will disclose the measures it's taking to restart its business.
Analysts, who chalk up TriTeal's misfortunes to its sales force's missteps
rather than to lack of product demand, also expect some financial guidance
at that time.
The company's products allow business-computer users to access software
written for an operating system that is different from the one their computer
uses.
In the meantime, analyst Arun Kumar of Piper Jaffray Inc. said the
shareholder suits could hurt earnings whether they are pursued in court or
settled.
The suits accuse TriTeal officers, directors and underwriters PaineWebber
Inc. and Piper Jaffray of knowingly issuing false and misleading statements
to artificially inflate and cash in on the stock.
The defendants are accused of recording "phony software license fees as
revenues" to conceal the "weak demand for (TriTeal's) products" and to
create the appearance that the company's business were more positive than
warranted.
"The lawsuits have no merit and the company will contest them vigorously,"
CEO Witous said.
TriTeal of Carlsbad, Calif., historically has depended on closing a handful
of large orders at the end of each quarter to make its revenue projections.
Failure to do so could have disastrous consequences.
Indeed, during its fiscal 1998 second quarter ended Sept. 30 TriTeal's
revenue plunged to $744,037 from $3.6 million a year earlier. Analysts had
expected second-quarter revenue to have neared the $7 million mark.
As a result, the company lost 75 cents, which includes a 35-cent charge due
to higher reserves for bad debt and costs to reorganize its sales force. The
year-ago loss was 3 cents.
"They failed to close on most every deal (in the quarter)," said Piper
Jaffray's Kumar. These deals, the number of which hasn't been disclosed by
the company, each would have contributed at least $500,000 to the top line,
Kumar said.
Since its disappointing performance, TriTeal reorganized its sales force to
target specific accounts within defined vertical industries, as opposed to the
prior approach of chasing after business geographically, CEO Witous said.
Wall Street analysts chalk up TriTeal's misfortunes to its sales force's
missteps, not the market for its core products.
They point to favorable trade reviews of the company's software, Ted and
WinTed.
Products such as WinTed and Ted are designed for companies that use a
mixture of computer operating systems and need users to access software
no matter what operating system it was designed for.
"This mixture of product is probably going to exist for a while," said Greg
Blatnik of market research firm Zona Research Inc., Redwood City, Calif.
"Where they've stumbled is purely on a sales-management issue," said
PaineWebber Inc. analyst James Preissler. "Their sales force is not doing
their job at following up and maintaining accounts."
The company's past shortfalls were attributed to the long sales cycle
prevalent in the government sector, which is one of TriTeal's major revenue
sources. But in the second quarter, outstanding commercial orders were
also a factor.
Problems with sales execution aren't unique to small startup companies like
five-year-old TriTeal, which went public in August 1996. The company's
performance is likely to continue to be significantly hurt by large unclosed
orders until quarterly revenues exceed current levels.
Quarterly revenues must exceed $15 million for the company to withstand
such shortfalls, Preissler said.
The company is expected to lose 28 cents in its December quarter and
$1.26 for its fiscal year ending next March, according to First Call Inc.
estimates provided by analysts Preissler and Piper Jaffray's Kumar.
Preissler estimated that TriTeal would lose 15 cents in its December
quarter and 98 cents for its fiscal year. Kumar estimates the company would
post losses of 40 cents and $1.53 during the same periods.
Analysts don't have a clear picture of TriTeal's revenue or profit prospects.
The company hasn't told analysts if it's been able to close outstanding orders
from the second quarter or made progress in collecting on its $8.2 million of
account receivables - twice historical quarterly levels.
Since June 1995, the company has generated $35 million in revenue, 10%
of which has been written off and another 23% of which is at risk,
PaineWebber's Preissler said in a recent research note.
As the company attempts to focus on basic blocking-and-tackling issues to
prop up its value on Wall Street, it is launching WinTed 2.1, a major
upgrade to its core product line.
CEO Witous said the market opportunities for the company are greater with
its WinTed than with its Ted product. WinTed allows Windows desktops to
access Unix software as if it were running on the desktop. Ted allows Unix
computers to access Windows software in the same way.
Both products enable companies to preserve their investment in existing
software even if they install new computers running different operating
systems.
The corporate market's embrace of computers running Microsoft Corp.'s
(MSFT) Windows NT operating system, for example, opens the door for
TriTeal to sell WinTed to companies that still need users to access existing
Unix software, Witous said. Financial-services companies in particular are a
key target for such a product, he added.
Eventually, TriTeal plans to allow WinTed to provide business users
running Windows desktops with access to mainframe-based software and
software written in Java.
The company has booked orders for the latest version of its WinTed
product, WinTed 2.1, but declined to quantify the amount. In the first week
that WinTed 2.1 has been posted on its Web site, TriTeal said 250
different companies downloaded the product for evaluation.
"The competitive landscape is probably oriented in their favor," Zona
Research's Blatnik said, characterizing TriTeal's products as "solid and
technically well-conceived."
-Maria V. Georgianis; 201-938-5244;
maria.georgianis@cor.dowjones.com |
