BEA meets lowered expectations

Amid industry speculation over the company's long-term viability, BEA Systems on Thursday reported revenue of $262.3 million for its most recent financial quarter, a number that was in line with the lowered projections released by BEA last week.

The software company's revenues were up 7 percent from the $245 million it reported in the year-ago quarter, but fell below BEA's earlier revenue projections of between $265 million and $275 million. Those projections were lowered by BEA last week as reports of executive defections began to circulate in the press.

Departing BEA executives included Chief Technology Officer Scott Dietzen, and Adam Bosworth, the company's chief architect responsible for longer-term initiatives, as well as Scott Edgington, vice president of worldwide channels and alliances; Rick Jackson, the company's senior vice president of marketing; and senior director of product marketing Erik Frieberg.

Though the company signed 18 licensing deals worth $1 million and added 488 new customers during the quarter ended July 31, BEA's licensing revenues dropped to $116.3 million for the quarter, BEA said in a statement. Licensing revenues for the second quarter of the company's fiscal 2004 year were $127.4 million, BEA said.

"The number of new projects surfacing in the marketplace is still pretty choppy," said Alfred Chuang, BEA's chairman and chief executive officer (CEO), during a conference call with financial analysts Thursday. "I think we're still waiting for the spending to burst and really get back to growth here."

"BEA is not alone. Our peer group has suffered very similar kinds of setbacks over the quarter," he said, an allusion to a string of disappointing financial results by companies such as Siebel Systems, Computer Associates International, and most recently, Hewlett-Packard, which on Thursday announced it had failed to meet earnings expectations for the quarter.

BEA is losing market share under pressure from larger companies such as IBM and Oracle, as well as open source products such as the JBoss application server, and the company now appears to be focusing on the transaction processing software that built the company, rather than visionary new product plans, said Anne Thomas Manes, research director at The Burton Group.

"I think they'll probably need to reduce some of their head count, " Manes said. "Maybe once they shrink down they'll start investing in more interesting things again."

Chuang said his company would spend the year ahead focused on selling the entire BEA platform of development tools, management software, and servers, rather than individual products. "Over the next year, year and a half, this will become a much more important thing for us to sell."

Following the revised guidance, financial analysts had been expecting BEA to report revenues of $262.8 million, and earnings of $0.07 per share, according to a survey conducted by Thomson First Call.

BEA's Nasdaq stock (BEAS) closed at $5.96 on Thursday. It was up $0.29 at $6.25 in after-hours trading Thursday evening on the The Island ECN exchange.

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