BEA Systems reported slower than expected software sales for its first fiscal quarter and said it has moved some of its top executives to new positions, including the head of its products group.
BEA's total revenue for the quarter, ended April 30, increased 11 percent from a year earlier, to US$262.6 million. But revenue from software licenses, seen by analysts as an important health indicator, declined 2 percent to US$120.2 million, below BEA's earlier projections, the company said.
"We signed 17 license deals over US$1 million dollars in Q1. While this is the most we've ever signed in a Q1, we are disappointed that we did not meet our license revenue plans, especially in the Americas," Alfred Chuang, BEA's chairman and chief executive officer, said in a statement Thursday.
Most of the large deals were signed in Europe, which had a particularly strong quarter, he said. Revenue from the Europe, Middle East and Africa region climbed 41 percent from a year ago, to US$98.9 million. But revenue from the Americas slipped 2 percent, to US$125.4 million, the company said.
In a conference call, Chuang blamed the shortfall on seasonal issues, the transition to a new version of BEA's software, and changes to its sales organization made at the start of the quarter. The company formed a new sales group to oversee small and medium-sized accounts, and to work with a network of value-added resellers (VARs) that it is building in North America.
The changes took longer than expected to put in place, and resulted in some "near-term disruption," Chuang said.
He also disclosed that Alan Fudge, senior vice president of sales for the Americas, has left the company. Charlie Ill, BEA's head of worldwide sales who joined the company from rival IBM about 18 months ago, will oversee the region directly until a replacement is found, Chuang said.
Separately, BEA has quietly made a handful of other changes at the top of its ranks. Olivier Helleboid, executive vice president in charge of BEA's product group, has been moved into a new role directing BEA's long-term strategy, Chuang said.
"Last quarter we decided to emphasize very heavily our longer-term strategic planning. ... Olivier is now driving long-term strategic planning, looking at what can we do to drastically and rapidly extend our marketplace, whether it's expanding the product offerings or expanding our channel," he said.
Helleboid has been replaced temporarily by Tod Nielsen, BEA's chief marketing officer, who will run the products group until a replacement is found. Nielsen also remains head of marketing, although "day-to-day operations" for the group will be managed by another executive, Rick Jackson, Chuang said.
The changes to BEA's sales group, which included the addition of 74 sales staff, were the right ones to make to ensure long-term growth, he said. BEA signed its first 12 VARs (value-added resellers) in North America in recent months, which it hopes will help drive further use of its software, he said.
The company is also developing additional packages of products tailored for vertical markets, including a services delivery platform for telecommunications providers that it is building with Intel, Chuang said. In addition, it is working with Hewlett-Packard to offer product packages for building customer self-service portals and implementing RFID (radio frequency identification), he said.
BEA could use the extra business, according to 2003 market share figures released this week by Gartner. BEA's main rival, IBM, increased its share of the application server market to claim 41.3 percent of worldwide revenue, up from 36.4 percent in 2002. BEA's share slipped to 27.5 percent from 28.9 percent, Gartner said.
The total market for application server software was worth US$1.04 billion in 2003, down from US$1.14 billion in 2002, Gartner said.
BEA's net income for the first quarter on a pro forma basis was US$33.5 million, or earnings per share of US$0.08, a slight increase from a year ago and in line with analysts' expectations, according to Thomson First Call. The pro forma results exclude acquisition-related costs, gains or losses on investments and other non-recurring items.
Using generally accepted accounting principles, BEA reported operating income of US$39.1 million and earnings per share of US$0.06, level with the same period a year ago. The company ended the quarter with cash and short-term investments of US$1.6 billion.
Looking ahead, BEA forecast second-quarter sales of US$255 million to US$275 million, at the low end of financial analyst projections, according to Thomson First Call. Bill Klein, BEA's chief financial officer, said the environment for selling software remains tough.
BEA is holding its annual eWorld conference in San Francisco later this month where it will provide an update on its product and technology plans.