In Q2 report, BEA forecasts slower growth

Application server software maker BEA Systems Inc. Tuesday reported revenue in line with estimates, thanks to growth in sales of its flagship software products, but cut revenue forecasts for the second half of the year due to the ongoing slump in IT spending.

The San Jose, California-based software company posted earnings of US$0.10 per share for the fiscal second quarter ended July 31, topping analyst estimates by $0.01, and doubling its earnings per share from the same quarter a year ago when it posted $0.05 per share.

Analysts polled by Thomson Financial/First Call expected BEA to post a profit of $0.09 per share.

Net income for the second quarter, excluding charges, totaled $43.9 million, up 101 percent from $21.9 million the same quarter a year ago. Including costs for acquisitions, employer payroll taxes on stock options, and net gains on investments in securities, BEA reported a net income of $23.9 million for the quarter.

Quarterly revenue grew 44 percent compared to the same quarter last year, the company said, mainly due to growth in sales of its software licenses. BEA's flagship product is the WebLogic Server. BEA reported revenue of $267.8 million, up from $186 million in the same quarter a year ago. Analysts expected revenue to come in at about $278.6 million.

This week, shares of BEA's stock have fallen to its lowest value in nearly two years as the company struggles to convince investors it would be able to meet its projected revenue estimates in future quarters. Shares of BEA (BEAS) closed the day at $18.60 in anticipation of the earnings announcement, gaining $0.54, or about 3 percent, in trading.

Prudential Securities analyst John McPeake and Credit Suisse First Boston analyst Wendell Laidley both cut forecasts for future revenue estimates contributing to BEA's stock plunge in the past week. McPeake cited the overall shrinking IT economy as reason to lower revenue estimates in a research note last week.

Laidley blamed the expected revenue shortfall on BEA's accounting practice of adding "deferred revenue" -- income generated in earlier quarters that have not yet been recorded in quarterly financials -- to its future quarterly results. Due to the accounting method, he said the IT slump is experiencing now will likely lower income in coming quarters.

BEA Tuesday followed analysts' lead, amending its outlook for the second half of the fiscal year. Third-quarter revenue is expected to be flat compared to the current quarter, the company said, with single-digit growth expected in the fourth quarter.

The company's Founder, Chairman, and Chief Executive Officer Bill Coleman said in a statement that "it is prudent to adjust our short-term guidance to be more conservative given the current business environment and recent trends in information technology spending."

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