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Sterling hurdles 4Q forecasts

Sterling Commerce (NYSE: SE) came in at the high end of its previously announced expectations for fourth quarter earnings.

After market close Wednesday, the e-business software vendor reported fiscal fourth quarter net income of $35.6 million, or 42 cents per share, excluding one-time costs and results from the XcelleNet business being spun off. Last month, Sterling said it expected to report earnings of 41 to 42 cents per share.

First Call's survey of 13 analysts predicted a fourth quarter profit of 40 cents per share for the quarter ended Sept. 30.

Non-recurring expenses related to Sterling's reorganization totaled $23 million in the fourth quarter. Including those charges and results from XcelleNet, Sterling earned 23 cents per share.

Fourth quarter revenue increased to $160.4 million, up more than 15 percent from almost $140 million in the year-ago period. Sterling had predicted revenue ranging between $157 million and $159 million for the fourth quarter.

Product revenue increased 11 percent year-over-year, while product support business improved 14 percent. Internet-related products and services generated 34 percent of Sterling's overall revenue, compared to 28 percent in the fourth quarter of fiscal 1998. Total Internet-related business rose 44 percent from year-over-year.

Services revenue in the fourth quarter rose 22 percent to $64 million.

About 21 percent of Sterling's total business came from outside the United States.

For the full fiscal 1999, Sterling earned $137.6 million, or $1.45 per share, on revenue of $561.5 million, excluding one-time charges and XcelleNet. Including those items, the company posted full year earnings of $123.9 million, or $1.31 per share, on revenue of $623.1 million.

Shares of Sterling rose 2 1/16 to 26 1/16 in Wednesday's regular trading prior to the earnings report. Among 19 analysts surveyed by Zack's Investment Research, 10 maintain the equivalent of "hold" advisories on Sterling, seven have "moderate buy" ratings, and two recommend the stock as a "strong buy".>