BEA reports growth in revenue, earnings for Q1

Application server vendor BEA Systems reported growth Wednesday in both earnings and revenue for its first fiscal quarter, although revenue from software licenses slipped from a year earlier.

Pro forma net income for BEA's first quarter was US$28.5 million, or $0.07 earnings per share, in line with financial analyst forecasts, according to a consensus estimate from Thomson First Call. In last year's first quarter, BEA reported pro forma net income of $25.3 million, or $0.06 earnings per share.

Revenue for the period, which ended April 30, came in at $237.3 million, up from $224.8 million a year ago and ahead of forecasts from financial analysts, who had predicted revenue of $236.8 million, according to First Call. Revenue from BEA's services division increased to $115.0 million, from $93.7 million a year earlier, while license revenue dropped to $122.3 million, from $131.1 million, BEA said.

"We're pleased with our execution and performance in what continues to be a very tough market," said Alfred Chuang, BEA's founder, chairman and chief executive officer, in a conference call to discuss the results. "We exited Q1 in strong shape."

The outbreak of severe acute respiratory syndrome (SARS) had little impact on BEA's first-quarter results but is likely to reduce sales in Asia in the second quarter, Chuang said.

"We expect some adverse impact in our Asia-Pacific business from SARS. We estimate it could be 2 to 5 percent of total revenue (from that region), and it's always possible the impact could be greater," he said. The region accounts for between 14 percent and 17 percent of BEA's total revenue, he added.

Taking SARS into account, as well as what BEA officials described as an uncertain economic and political environment, the company expects revenue from its second quarter to be "flat to up as much as 5 percent" compared to the quarter just ended, while operating profit and earnings per share should be similar to those reported in the first quarter, Chuang said.

The results come one week after Gartner Inc. released a report showing BEA to have lost its lead in the application server software market to IBM Corp., its closest rival. IBM's share of license revenue climbed from 31 percent in 2001 to 37 percent in 2002, while BEA's share slipped from 34 percent to 29 percent over the same period, Gartner found.

"The tight horse race that started in 2000 between IBM and BEA was won in 2002 by IBM as they continued to gain market share in all categories of (the applications integration market)," Joanne Morin Correia, the Gartner vice president and research director who wrote the report, commented at the time.

At the same time, BEA accelerated its push into related markets for products such as portal software and integration software, landing in the top five vendors in many of those related markets, she wrote.

BEA is on track to release Version 8.1 of its WebLogic Server Platform Edition this summer, which should strengthen its hand in the market for software used to integrate business applications, Chuang said in Wednesday's conference call. Version 8.1 of its WebLogic Application Server was released earlier in the year; the platform edition adds BEA's portal server, integration server and Workshop developer environment in what BEA says is a tightly integrated package.

Providing integration software that helps businesses tie together disparate applications using Web services will continue to be BEA's main focus, Chuang said. The 8.1 release of its WebLogic Platform should make the job of integrating applications easier for developers by creating closer ties between its products for developing and deploying applications, he said.

Rival Java vendors IBM and Sun Microsystems Inc. are pursuing similar strategies, as is Microsoft Corp. with its .Net platform. BEA's integration products also compete with vendors such as Tibco Software Inc., SeeBeyond Technology Corp. and webMethods Inc.

The first-quarter pro forma results above exclude acquisition-related expenses, gains or losses from securities investments, payroll taxes on stock options and other non-recurring charges. Using generally accepted accounting principles, BEA reported net income for the first quarter of $24.5 million and earnings per share of $0.06, up from $3.9 million and $0.01 a year earlier, the company said.

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