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Image company pictures earnings shortfall

Getty Images warns that its first quarter will not meet expectations and its previous projections are out of focus.

    Getty Images warned Tuesday that its first quarter would not meet Wall Street's expectations and said all previous financial projections are not accurate.

    Shares in the e-commerce provider of images and related services were off $1.07, or 7 percent, to $13.86 in early trading. But by the close, the stock rebounded sharply, up $4.07, or more than 27 percent, to $19 on the Nasdaq. Getty has an archive of 70 million still images and more than 30,000 hours of stock film footage.

    The Seattle-based company had issued what it called prudent projections for the year on Feb. 8, along with its fourth-quarter report. At that time, Getty had said it expected first-quarter revenue of $130 million to $133 million and an EBITDA (earnings before income taxes, depreciation, amortization) margin of around 23 percent. It also told investors to expect 2001 revenue of $550 million to $565 million with EBITDA margins of between 26 percent and 27 percent.

    Getty Images now expects revenue for the first quarter ended March 31 to be about $124 million, about 5 percent below the previous projection. Analysts were expecting sales of $130 million, according to First Call.

    The company said EBITDA margin is expected to be about 22 percent and after-tax cash flow per share is expected to be between 37 cents a share and 39 cents a share. Analysts said they were still calculating how Getty's EBITDA outlook translates to earnings-per-share figures.

    For the second quarter of 2001, the company expects to report revenue of $120 million to $130 million. The EBITDA margin is anticipated to be approximately 23 percent. Analysts were expecting second-quarter sales of $137 million, according to First Call.

    Revenue for 2001 is now expected to be in the range of $510 million to $540 million, compared with First Call's projection of $560 million. The company expects to generate an EBITDA margin of between 24 percent and 26 percent for 2001.

    The company said its first quarter was hurt because of a slowdown in the advertising market. Customers began to experience delays and cancellations in budgets, and have not been able to predict if things will improve later in the year.

    The company will announce full first-quarter results on April 25, at which time it will update projections for the rest of the year.