Axent shares plummet 59.69%

Y2K bug blamed for software maker's earnings shortfall

April 06, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Some people believe the year 2000 heralds Judgment Day and the end of the world.

Axent Technologies Inc. might be wondering if those prophecies could be true.

The Rockville computer-security software company lost 59.69 percent of its stock value yesterday -- falling $11.9375, to $8.0625 -- after it issued disappointing earnings predictions. The company said the Year 2000 computer problem was causing potential customers to delay buying security software.

The company said it expects to report a loss of between 5 cents and 10 cents per share for its first quarter, which ended March 31, not including special charges associated with recent acquisitions. Axent had been expected to post a net income of 18 cents per share for the quarter. In the same period last year, the company's continuing operations earned 13 cents per share, excluding nonrecurring expenses. Axent will report first-quarter earnings April 29.

"After 11 consecutive quarters of exceeding our expectations, we are disappointed with the results of the first quarter," Axent Chairman and Chief Executive Officer John C. Becker said in a statement, blaming "the shifting of customer budgets and spending to Year 2000 and other issues" for the projected shortfall.

Becker said the company plans to break even this year, not including special charges. Analysts had predicted that Axent would earn $1.01 per share for the year. The company posted net income of 80 cents per share, absent special charges, last year.

`A little overreaction'

Analysts said the punishment Axent took on Wall Street yesterday represents a broad concern about how software companies will fare as 2000 looms.

"I think there's a little overreaction [among investors], but at the same time, I think the market is placing a huge discount on this year and rightly so," said David Hilal of Friedman, Billings, Ramsey & Co. Inc. in Arlington, Va. "The rest of this year looks bad for this company and for other software companies."

Axent is the latest in a series of software makers that are expecting weaker financial numbers, including SAP AG of Germany, PeopleSoft Inc. and Secure Computing Corp.

One reason given for the software swoon is Y2K: As businesses throw time and money into making their systems read the year "00" as 2000 rather than 1900, other computer needs like added security get pushed into the background.

"People say, `For now, I just need a gate with a lock on it. For right now, I'll focus on Y2K,' " said Roy Lobo of Moors & Cabot Inc. in San Francisco.

Lobo added that Axent and other software companies with Defense Department accounts may face uncertainty as the airstrikes in Yugoslavia continue.

Those factors are not Axent's only concerns. The company's shares fell 25.96 percent Wednesday after it announced the purchase of British firm PassGo Technologies in a stock transaction initially valued at $50 million; many investors view PassGo as overpriced and incompatible with Axent's holdings.

Better days

Including yesterday's dive, Axent shares are down 77 percent since March 15, when they closed at $35.0313.

Even as they watched the company's stock continue to slide, analysts said Axent faces better days -- after Jan. 1, 2000.

"This company historically has executed very well. It's a company I think is run well," said Hilal. "I think next year will be a great year for this company and for other software companies once this Y2K problem is put to bed."

Pub Date: 4/06/99

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