WebMethods joins B-to-B rivals in cutting back

Yet another business-to-business software vendor is warning of a big loss for the just-finished quarter and announcing workforce cutbacks in an effort to lower its spending.

Fairfax, Va.-based webMethods Inc. today disclosed that the deficit in its fiscal first quarter ended June 30 will be significantly larger than expected due to a revenue shortfall. The company said it will post a loss of between US$4.2 million and $4.7 million, compared with an average prediction of a $944,000 loss from analysts surveyed by First Call/Thomson Financial in Boston.

Revenue for the quarter is now expected to come in at about $55 million, well below the $63.5 million Wall Street analysts were predicting. WebMethods blamed the weak showing on spending slowdowns by corporate customers and said it plans to lay off about 160 of its 1,060 employees as part of a wider cost-cutting program.

The 15 percent workforce reduction will be made today, according to a webMethods spokeswoman. "It makes the most sense to make the decision and move quickly," she said, adding that the job cuts will affect all departments at the company.

The warning by webMethods follows similar announcements made on Tuesday by fellow B2B vendors i2 Technologies Inc. and BroadVision Inc., which both said they expect to report losses for the second consecutive quarter. Dallas-based i2 and Redwood City, Calif.-based BroadVision have already laid off workers this year, and BroadVision said it may make more job cuts if business conditions don't improve.

Phillip Merrick, chairman and CEO of webMethods, said in a statement today that the layoffs and other expense reduction moves are needed "to realign our resources and adapt our business to the current economic environment."

The sales cycle for the company's software "is lengthening as customers continue to defer spending decisions, and the internal approval process is becoming even more complex," Merrick said. "We are very confident in our ability to close business opportunities in our pipeline, but we are less certain about the timing."

WebMethods said it plans to take a restructuring charge during the fiscal second quarter, which started this week, to cover severance pay and other costs associated with the layoffs. However, the company didn't disclose the anticipated size of the charge.

The three B2B vendors aren't the only companies warning of lower-than-expected financial results this week. For example, data storage market leader EMC Corp. in Hopkinton, Mass., yesterday lowered its business outlook for the third time this year, saying that its second-quarter revenue and profits will fall well short of earlier projections.

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