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New Era plunges on warning, analysts jump ship

Shares in New Era of Networks Inc. (Nasdaq: NEON) plunged 25 1/8 to 18 15/16, or 57 percent Wednesday morning after the company said it would report a second quarter loss because of missed sales. The collapse was magnified as analysts bailed out on the stock.

Credit Suisse First Boston cut its rating from "strong buy" to "buy" and Prudential Securities, Inc. and Warburg Dillon Read both cut it to "hold" from "strong buy" Wednesday morning.

After market close Tuesday, the Denver, Colo.-based software vendor said it expects to report a loss ranging between 12 cents and 22 cents a share for the quarter ended June 30, not including taxes and acquisition-related writedowns. First Call's survey of nine analysts had predicted a profit of 12 cents a share. The company also said revenue between $25 and $30 million was expected, versus CS First Boston's high-end prediction of $33.6 million.

CS First Boston also cut its price target from $70 to $26, lowering 1999 revenue estimates to $114 million from $145 million, and bringing down earnings estimates for the year to a loss of 23 cents a share from a profit of 51 cents a share. CS First Boston also lowered estimates for 2000 to $150 million from $225 million, and earnings to 16 cents a share from 78 cents a share.

The firm cited slowing organic growth, poor return on resources committed to the IBM Corp. (NYSE: IBM) relationship and expenses not offset by revenue as the key factors in their downgrade.

New Era CEO Rick Adam blamed the shortfall on a failure to close on some sales that had been expected at the end of the quarter. New Era also continued racked up costs from infrastructure spending, Adam said. "Although we are unhappy about falling below our internal goals for the quarter, we are confident in the overall strength of the market for the company's products," he said.

New Era, which sells software for integrating different corporate computer systems, saw sales of $29.6 million in the first quarter, and $11.5 million in the year-ago period.

Several enterprise software vendors have seen their sales growth slow dramatically as corporate clients shift spending from new projects to Y2K troubleshooting.

Sergio G. Non contributed to this report