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Technology Stocks : CrossKeys Systems Corp [CKEY and CKY/TSE] -- Ignore unavailable to you. Want to Upgrade?

To: Glenn McDougall who wrote (409)	2/26/1999 6:49:00 AM
From: Glenn McDougall	Read Replies (1) \| Respond to of 792

CrossKeys projects slower growth ahead By SUSAN TAYLOR, Ottawa Sun CROSSKEYS Systems Corp.'s record-breaking performance just hit a bump. The Kanata-based firm, which develops network management software, turned in a solid third quarter, but warned the next six months don't look quite so bright. CrossKeys recorded a profit of $1.4 million, 11cents a share, on sales of $13.5 million -- in its last quarter, profits stood at $2.1 million, 11cents per share. Those results exclude a one-time charge of $1 million, 4cents a share, from Newbridge affiliate West End Systems, which declared bankruptcy. In the same period last year, CrossKeys saw a profit of $1.3 million, 7cents a share, on sales of $9.9 million. Projections for a weaker performance in the upcoming fourth and first quarters are driven by several factors. Revenue from channel partners is expected to take a hit and sluggish sales will continue in Asia. "We do anticipate to be profitable, but clearly at reduced levels," said chief financial officer Steve Spooner. "We believe this is a short-term issue to deal with ... we're not looking to take any drastic action." While CrossKeys has been working to expand its channel partners, three firms make up most of its sales. Over the last three quarters, Newbridge has consistently made up about 53% of sales. Siemens dropped from 33% in the first two quarters to 27%. That will drop further, from about $4 million to $1-$2 million, in the next two quarters as Siemens takes over development of management software for a network switch. Revenue from Ascend Communications, a channel partner added last quarter, won't result in significant revenue for two more quarters. Meanwhile, CrossKeys expects weak sales to continue in its Compaq channel. An effort to scale down high-ticket technology to smaller products, and boost revenue, won't result in products for one to two quarters. Compaq sales of $1.6 million in this quarter may drop to under $1 million, Spooner said, falling from 12% of channel partner sales to between 5% and 10%. Weak sales in Asia are also expected to continue. This quarter, the region represented 9% of sales at $1.3 million. That may drop to 4-5%, or about $500,000. Chief executive John Selwyn said he's confident the firm will rebound in the second quarter of 2000. He's buoyed by upcoming new products, the promise of new channel partners and better sales prospects. "We will be the dominant supplier," he said. "We hold the master key." CrossKeys shares closed unchanged at $5.88 on the U.S. Nasdaq yesterday.