Key Md. software stock falls 29%

Market hammers Manugistics over predicted losses

September 07, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Wall Street punished Manugistics Group Inc. yesterday, at one point sending its shares down more than 45 percent, after the Rockville software company reported that its earnings and revenue would be lower than expected for the fiscal second quarter.

Shares fell $3.16, or 29 percent, to close at $7.80 on the Nasdaq stock market. Only two other stocks saw larger percentage declines on the Nasdaq yesterday.

At a time when the entire tech sector is taking a beating, analysts said the plunge in Manugistics' stock - down 88 percent from its 52-week high of $66.06 - did not come as a surprise.

"Why would anyone be surprised?" asked Todd Bernier, a stock analyst who covers the company for Morningstar Inc. "The fact is that they had a huge valuation before, probably unjustified, and yet they play in the same sandbox as everybody else."

Manugistics said Wednesday after the market closed that it expected a net loss of 14 cents to 16 cents per share on revenue of $68 million to $70 million for the quarter that ended Aug. 31. Software revenue is expected to be between $24 million and $25 million.

Analysts polled by Zacks Investment Research Inc. were expecting earnings of about 3 cents per share.

Manugistics' chief financial officer, Raj Rajaji, previously had said that second-quarter earnings would be 3 cents per share, down from original estimates of 4 cents per share. He also had estimated that revenue for the fiscal second quarter would be slightly higher than first-quarter revenue of $89.8 million.

The company plans to report fiscal second-quarter earnings Oct. 3, and company officials declined to comment yesterday. But in a press release issued Wednesday, Greg Owens, Manugistics' chairman and chief executive officer, attributed the lowered earnings estimates to trouble in the market.

"Despite the strong revenue growth and market momentum we have achieved over the last seven quarters, general market conditions and economic uncertainty adversely impacted our second quarter financial performance," he said in the release.

"Late in the quarter, companies across many of our market segments, including segments that appeared robust, became even more cautious and deliberate regarding commitments to capital expenditures, resulting in lengthened sales cycles and unanticipated order delays," the Manugistics CEO said.

Analysts agreed that the problem lies within the technology sector. "The market for complex software right now has dried up, and that's not the fault of Manugistics, but that's the reality that they face," Morningstar's Bernier said. "Until the slowdown, they were performing very well."

Bradley G. Whitt of SWS Securities downgraded the stock to "neutral" from "buy."

Goldman Sachs maintained its market "outperform" rating on Manugistics, but lowered its fiscal 2002 financial estimates to a net loss of 20 cents per share on revenue of $292 million, instead of earnings of 20 cents per share on revenue of $371 million.

"At the end of the day, most people believe ... the environment's terrible, and it caught up with them," said Bert Hochfeld, senior technology analyst at Josephthal & Co. in New York.

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