Shares of Art Technology dropped 40 percent Monday after the company announced it will see a loss instead of the profit Wall Street was expecting in its first quarter. Analysts downgraded the software maker and said things aren't likely to improve anytime soon.
Shares were off $4.88 to $7.13. Art Technology (Nasdaq: ARTG) makes Dynamo, a Java-based software suite to develop Web applications, as well as personalization and customer-relationship management tools for delivering targeted advertising and e-mail. Web site design, consulting and support services make up about 40 percent of the company's business.
Art Technology now sees a net loss of between 19 cents and 22 cents per share for the quarter on revenue of between $40 million and $42 million. That's well shy of First Call's $69.6 million estimate for revenue and 9 cents per share profit. The company blamed the failure of some expected deals to close as technology purchasing slowed with the overall economy.
Art Technology also said it would report "deferred revenue" of about $21 million for the quarter.
Robinson-Humphrey analyst William Chappell downgraded the stock to "neutral" from "outperform," and said the outlook shocked him.
Chappell had already downgraded the stock several weeks ago due to concerns about the market. Today's news leads him to believe it will "take several quarters for the company to curb costs and regain its momentum in the marketplace."
Deutsche Banc Alex Brown analyst Timothy Dolan also downgraded the stock to "market perform" from "buy," and noted that the revisions will cause him to "have concerns on the company for at least the next two quarters."
He remained upbeat about the fact that the company offers a "high-quality solution" within a uniformly damaged sector.
Salomon Smith Barney analyst Heather Bellini was also optimistic that the stock was faring well compared to competitors. In a research note on software and e-business applications companies Monday, Bellini ranked companies by their ability to emerge from an economic downdraft. Art Technology came in second only to Siebel (Nasdaq: SEBL), with Epiphany (Nasdaq: EPNY), EXE Technologies (Nasdaq: EXEE), Vignette (Nasdaq: VIGN) and Broadvision (Nasdaq: BVSN) all trailing behind it, in that order.
However, Bellini said the worst may be yet to come.
"For the most part, software is still experiencing its first round of estimate cuts," said Bellini. "The lack of revenue visibility and the prospect that the European economy could face a downturn, it is likely that forecasting revenues in the second quarter of 2001 could also pose a challenge."