Analysts find positives in USi quarter

USinternetworking gained 15 percent on Wednesday after the company beat lowered estimates for its fourth quarter and analysts found a bright side to the results.

Shares of the company added $0.56 to $2.81 early in the trading session. USinternetworking (Nasdaq: USIX) provides hosted applications via the Internet along with information technology services.

Back in November, the company secured more than $300 million in equity and credit financing. Equity investors included Microsoft (Nasdaq: MSFT) and Aether (Nasdaq: AETH), while USi also secured credit from GE Capital.

After market close Tuesday, the company reported a net loss of $45.6 million, or 44 cents a share, on revenue of $37.3 million. The results topped analysts' estimates, which projected a loss of 48 cents a share on revenue of $34.76 million.

The quarterly results improved on the 56 cents a share loss seen on revenue of $14.7 million in the year-ago period.

For full year 2000, the company saw a net loss of $175.0 million, or $1.80 a share, compared to the $2.93 a share loss posted for 1999. The loss was also 3 cents narrower than First Call's full year estimate.

Total revenue for fiscal year 2000 was $109.5 million, a 208 percent increase over the $35.5 million taken in for fiscal 1999.

As for its outlook, the company said that first-quarter revenue is expected to be about $35.0 million, with full year 2001 revenue pegged at around $180.0 million--both below analysts' consensus estimates.

Net loss, however, is projected to be 35 cents a share for the first quarter, and between $1.12 to $1.14 a share for the full year. Both figures are narrower than the Street's estimates.

Analyst reaction was generally positive, focusing on the company's improvements.

At Janney Montgomery Scott, analyst Mayank Tandon reiterated an "accumulate" rating on USi stock, and maintained a $9 price target.

"After a difficult fourth quarter, during which the company made a conscious effort to transition its customer base to enterprise clients from venture-backed dot-com clients, the company is seeing demand returning to normal," Tandon wrote in a research report.

Peter Giglio at Gerard Klauer Mattison maintained an "outperform" rating and a $10 price target, while lowering 2001 estimates slightly.

Despite adopting a cautious stance on the company given the reduced outlook, the analyst remained optimistic, stating that he believed that USi was well positioned to capitalize on the fundamental shift from traditional customized software solutions.

At C.E. Unterberg, Towbin, analyst William Dering reiterated a "neutral" rating on the stock, based on lingering visibility concerns.

Still, the analyst said he viewed that stock as a "borderline 'buy'". Dering based his conclusion on the fact that the company's stock is trading near an all-time low and its long-term outlook remains solid.