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Magic Software sees sales, earnings disappearing in 2Q

Magic Software shares tumbled 4, or 27 percent, to 10 7/8 Monday after it warned that its second-quarter and fiscal 2000 sales and earnings will fall short of analysts' estimates.

Company officials blamed sluggish sales in North America and Japan as well unfavorable currency exchange rates for the shortfall.

First Call Corp. consensus pegged Magic (Nasdaq: MGIC) for a profit of 14 cents a share in its second quarter and 62 cents a share in the fiscal year.

Magic Software CEO Jack Dunietz said the company’s net income for the year would be about $6 million less than expected because of difficulties in the second-quarter. Analysts had expected about $18 million net income for the year, but Dunietz said the Israeli company will likely report $12 million.

Dunietz said results in the second quarter have suffered because the company’s transition from a provider of software “tools” to applications is taking longer than expected.

He also said the slower pace of the transition is a setback for the company, but is not the sign of a deeper, long-term problem with the business.

"Despite this glitch there is nothing fundamentally wrong with the company,” Dunietz told analysts during a conference call.

It now sees sales for the second quarter coming in around $20 million. Earnings are now expected to be approximately $1.8 million, the company said

Last quarter, Magic posted a profit of $4 million, or 14 cents a share, on sales of $21.7 million.

Its shares peaked at 33 in February after a 3-for-1 stock split.

All four analyst following the stock rate it either a "buy" or "strong buy." >