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Opsware forecasts jump in revenue

Strong customer demand will help double sales for fiscal 2005, and fourth-quarter revenue for 2004 will top its previous expectations, the company predicts.

Strong customer demand will help double Opsware's revenue for fiscal 2005, and fourth-quarter revenue for 2004 will top its previous expectations, the company said on Wednesday.

The Sunnyvale, Calif.-based company, which sells software to automate administrative tasks in corporate data centers, said it expects to report revenue of $6.2 million for the fourth quarter and $18 million for fiscal 2004, both ended Jan. 31. That compares with an earlier fourth-quarter target of $6 million. The company anticipates cash flow from operations of $1.5 million for the quarter, which would be a positive result for the third quarter in a row.

Looking forward, CEO Ben Horowitz said Opsware expects to book between $35 million and $37 million in revenue for the fiscal year ending Jan. 31, 2005. More than 85 percent of that anticipated revenue will come from business customers that the company has already signed up, he said.

A rise in server sales and growing interest among businesses in lowering the cost of complex computing system operations are creating strong customer demand, according to Horowitz. Companies have moved from a client/server computing model to Web computing for greater flexibility. But the shift is creating more complexity, he said.

"The good news is that the cost of application development has dropped incredibly, and the usefulness has increased," Horowitz said. But the shift is creating more complexity and higher operational costs, he said.

Opsware is one of several smaller U.S. companies focused on a software category called data center automation. They provide tools to streamline operations such as provisioning servers or distributing software patches and new configurations to a large number of machines.

Many of these specialized companies have been acquired by information technology heavyweights, which buy them to fill in pieces of their utility computing initiatives. Sun Microsystems, IBM, Hewlett Packard and Veritas have snapped up data center management companies and are merging the companies' software into their utility computing products.

Opsware, which was co-founded as Loudcloud by former Netscape exec Marc Andreessen, has been trying to navigate a turnaround for the past two years.

In 2002, Loudcloud sold its managed hosting business to consulting firm EDS and changed its name to Opsware. It began focusing solely on selling the software that formerly underpinned its managed service.

Since then, the company has attempted to raise its profile. In October 2003, it spearheaded an industry standardization effort called "" with EDS. In December, it paid $10 million for Tangram, which sells software for managing and securing computing assets.

Opsware is scheduled to formally report results for the fourth quarter and for 2004 on March 4.

Donovan Gow, an analyst at American Technology Research, said in a recent research note that Opsware's stock price is poised to rise substantially this year, spurred by strong customer demand.

The company's stock price was up 15 cents to $8.98, a rise of 1.7 percent, at market close on Wednesday.