Sybase Ends Fiscal Year on a High Note

U.S. database and tools vendor Sybase Inc. topped off a fiscal year of financial recovery today by announcing positive fourth-quarter and year-end results, thanks to the performance of the company's mobile and Internet businesses.

For the fourth quarter of fiscal 1999, ended Dec. 31, Sybase reported net income of US$26 million, which compares with a net loss of $15 million for the year-ago quarter, according to a company statement issued today. Revenue was essentially flat at $237 million as opposed to $232.5 million for the fourth quarter of fiscal 1998. However, fourth-quarter revenue rose 9.7 percent compared to the $216 million recorded in the immediate prior quarter. Until last year, Sybase had experienced quarter after quarter of financial losses due to a number of factors including problems with some of the vendor's products and the growing commoditization of the database industry.

Earnings per share for the fourth quarter were 32 cents, a substantial improvement on the 21 cents analysts had been predicting for the three-month period.

"We're very happy," said Pieter Van der Vorst, Sybase's vice president and chief financial officer, in a telephone interview today.

For the year as a whole, Sybase announced earnings per share of 76 cents, again up on analysts' expectations of 62 cents.

Net income for fiscal 1999 was $62.5 million, up on a net loss of $93.1 million for the whole of 1998. Revenue for the full year was essentially static at $871.6 million, compared to $867.4 million in fiscal 1998.

Fiscal 1999 was the company's second most profitable year in its entire history, according to Sybase Chairman, President and Chief Executive Officer John Chen, in today's statement.

Examining the quarterly results by region, Sybase performed particularly well in Europe where license revenue rose 27 percent year-over-year to account for $65.9 million, Van der Vorst said. In North America, license revenue only grew by 3 percent to $139.8 million, while in the intercontinental region -- which for Sybase encompasses all of Asia-Pacific including Japan and Latin America -- license revenue was up 9 percent to $31.3 million, he said.

Both Sybase's enterprise solutions division (ESD) and its mobile and embedded computing division grew strongly during the quarter, Van der Vorst said. While ESD's license revenue grew 28 percent quarter-on-quarter to reach $96.9 million, the mobile division's revenue rose 18 percent to account for $22.8 million.

The rosy picture fades, though, when looking at the company's two other divisions -- Internet applications, where license revenue fell by 6 percent to $22.6 million, and business intelligence, which saw a 21 percent drop to $5.7 million.

"The decline in Net applications is obviously associated with the mature tools business," Van der Vorst said. "It's been a very difficult market for everyone over the last two years and a very challenging place for us to be." However, he added, growth in Sybase's Enterprise Application Server and its Financial Server should boost the division's performance over time, as the company encourages developers to move away from the client/server environment towards the Web.

As for Sybase's business intelligence unit, that should really still be considered a startup operation, particularly since in terms of revenue it contributed only 5 percent to the company's fourth-quarter revenues, Van der Vorst said. The division will take off once the relationships Sybase has put in place with the likes of Compaq Computer Corp. and Silicon Graphics Inc. begin to bear fruit, which will probably be in the first and second quarters of fiscal 2000, he added.

During the fourth quarter, the company's ESD was the dominant contributor to Sybase in license revenue. That unit generated 79 percent of license revenues, followed by its Internet applications and mobile units, which each produced 18 percent, Van der Vorst said.

Business intelligence was the one area that may have been hit by users unwilling to invest in software last quarter due to fears about the impact of the year 2000 problem, Van der Vorst said. The rest of the company's business was unaffected by Y2K, since many Sybase customers come from the financial sector and were legally required to be year 2000-compliant as of June last year, he added.

Looking ahead, Van der Vorst expects fiscal year 2000 revenue to grow by 10 percent and for first-quarter revenue to be exceed that of the year-ago quarter.

Also today, Sybase closed its $130 million purchase of privately held Internet financial services company Home Financial Network (HFN), Van der Vorst said.

The company is nearing a decision on what to call the wholly owned subsidiary it is forming to house both HFN and Sybase's own Financial Server business unit, with a total headcount of 175 staff.

The acquisition of HFN was first announced last month and, given the $353 million Sybase has on hand in cash and investments, the company is likely to engage in further acquisitions and partnerships to boost its position in other vertical markets such as telecommunications and healthcare, Van der Vorst said.

Sybase, based in Emeryville, California, can be reached at +1-510-922-3500 or via the Internet at http://www.sybase.com/.

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