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In terms of earnings, webMethods Inc. appears to be leading the pack of pure-play application-integration software vendors. The company was the only one in its class to increase market share in each of the last two quarters and to increase revenue sequentially from the third to the fourth quarters, financial holding company Friedman, Billings, Ramsey & Co. Inc. said in a research report released Thursday.
On a pro forma basis, excluding amortization of stock, warrants and goodwill, and equity investment impairment charges, webMethods reported breaking even for the quarter ended March 31 at zero cents a share on revenue of $50.7 million. During the same quarter last year, webMethods reported a loss of $46.8 million, or 97 cents a share, on revenue of $61.8 million. When the charges are included, webMethods reported losing $15.7 million, or 31 cents per share.
When compared with the third quarter, WebMethods' license revenue increased 8% to $32.8 million, and its revenue increased 3% from $49.1 million. The company signed 55 new customers in the latest quarter, five for more than $1 million. In the third quarter, webMethods signed 50 new customers. In addition, the company broke even a quarter earlier than projected and two quarters sooner than forecast by some analysts. The company had reported four straight quarters of pro forma losses. WebMethods also beat Wall Street estimates for the fourth quarter. Analysts polled by First Call/Thomson Financial had predicted a pro forma loss of 5 cents a share on revenue of $49.7 million.
For fiscal 2002, webMethods reported a net loss of $82.7 million, or $1.67 per share, compared with a loss of $131.6 million, or $2.81 per share, for the previous year. Revenue was $196 million for 2002, compared with $202 million in 2001. For fiscal 2003, company execs forecast revenue between $210 million and $225 million and earnings per share between 10 and 14 cents.
Despite the better-than-average numbers, FBR, which has a buy rating on the stock, warns that webMethods' stock carries some risks from increasing competition in the market, the possibility of a longer-than-expected economic downturn, and market acceptance of XML, a new standard core to webMethods' products. Also, FBR analysts wrote, "similar to other fast-growing technology companies, the company's stock has experienced above-average volatility."