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CacheFlow loss smaller than expected

The maker of computers that speed the distribution of information over the Internet beats Wall Street expectations by 2 cents, with a loss of 9 cents per share.

CacheFlow, a maker of computers that speed the distribution of information over the Internet, beat Wall Street expectations Tuesday by 2 cents, with a loss of 9 cents per share.

The company had revenue of $32.5 million for its fiscal second quarter, which ended Oct. 31, a 45 percent increase over the first quarter's $22.4 million and a 573 percent increase over the year-ago quarter's $4.8 million, the Sunnyvale, Calif., company said.

"It was a great quarter," chief executive Brian NeSmith said in a conference call Tuesday. "We continue to believe we're growing faster than the market, capturing market share." Primary competitors are Network Appliance and Inktomi, he said.

Investors were less forgiving. In after-hours trading on the Island exchange, the stock sank $14.31 from its close of $76.81 to $62.50, compounding loss of $14.81 that took place in regular trading before the market close.

Robertson Stephens analyst Dane Lewis suggested investors might have been disappointed that revenue grew only 45 percent sequentially, when three months ago the sequential revenue growth was 75 percent.

NeSmith said CacheFlow continues to expect to become profitable in its fourth fiscal quarter of 2001, which ends in April.

The pro forma net loss for the most recent quarter, excluding stock compensation expense and goodwill amortization, was $3.1 million, or 9 cents a share, compared with a loss of $5.3 million, or 22 cents a share, for the year-ago quarter. Analysts surveyed by First Call/Thomson Financial expected a loss of 11 cents a share.

Including the stock compensation and goodwill amortization, the net loss for the quarter was $25.6 million, or 75 cents a share, CacheFlow said.

In October, CacheFlow announced plans to acquire Entera, a company that develops software to improve video and audio streaming. Also in the quarter, CacheFlow signed a deal to provide mobile phone company Ericsson with servers to distribute Internet information.

And last week, Hughes Network Systems said it's using CacheFlow servers in its DirecPC satellite-based high-speed Internet service.

The company signed on several new customers for both its major sales segments, the service providers who build Internet infrastructure rented by others and the large corporations that use the hardware themselves.

Among the new service provider customers were BellSouth, Excite@Home, UUNet and WorldCom, NeSmith said. Large "enterprise" customers included ABC Television, Chase Manhattan, CitiBank, Corning and Fidelity Investments, he said.

The enterprise business currently accounts for about 64 percent of CacheFlow's revenue and is growing faster than the service provider segment, NeSmith said. It takes effort to educate service providers about the merits of CacheFlow technology, he said.

The company is moving into servers that accelerate the distribution of audio and video information streams, an increasingly important but taxing use of corporate networks. "It's not uncommon for a single streaming event to break a network," NeSmith said.