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Convergent nears IPO price on earnings boost

Convergent Communications, Inc. (Nasdaq: CONV), an enterprise network carrier that went public last month, posted Wednesday a second quarter loss of $23.3 million, or $1.64 a share, on sales of $36.6 million. First Call had no consensus estimate for the company.

Shares rose over 6 percent in initial trading Wednesday, and were up 11/16 to 13 7/16 mid-morning, below their offering price of $15 each. Convergent's July 23 IPO put 8.9 million shares on the market, netting about $123 million for the company.

This quarter's loss compares to a net loss of $11.2 million, or 82 cents a share for the quarter ended June 30, 1998, or a net loss of $20.7 million, or $1.48 a share for the previous quarter. Losses per share reflect the one-for-two reverse stock split completed July 20, 1999.

Revenue of $36.6 million for the quarter ended June 30, 1999, compared to revenue of $8 million for the quarter ended June 30, 1998, and was a 20 percent increase in sequential growth from the $30.5 million posted for the quarter ended March 31.

According to the company's revenue breakdown, services-related revenue accounted for 46 percent of the total, data and voice services chipped in about $15.6 million, and ENS (Enterprise Network Services) added in $1.1 million. Product-related revenue contributed $19.9 million for the quarter up from the $5.6 million it netted in the previous year's quarter.

During the second quarter, Convergent announced plans for an integrated data and voice services network with Cisco Systems, Inc., (Nasdaq: CSCO). The company said installation of Cisco-Based ePOPs (enterprise Points of Presence) and its Multi-Service IP+ATM (Internet Protocol) and ATM (Asynchronous Transfer Mode) switch platform is continuing in line with plans.

Convergent also grew its signature service offering, ENS, in the second quarter, inking contracts with 23 ENS customers, expected to provide about $16.2 million in revenue.