Portal Software tops estimates, cuts forecasts

Portal Software topped analysts' estimates in its fourth quarter Wednesday, earning $6.9 million, or 4 cents a share, on sales of $81.1 million. But it lowered its sales and earnings estimates for the first quarter and all of fiscal 2002.

First Call Corp. consensus pegged the Internet software developer for a profit of 3 cents a share on sales of $81.7 million.

Portal Software (Nasdaq: PRSF) shares closed off 19 cents to $9.75 ahead of the earnings report before inching up to $9.78 in after-hours trading.

The $81.1 million in sales represents a 108 percent jump from the year-ago quarter when it earned $369,000 on sales of $39 million.

Portal Software creates customer-management and billing software for the Internet and other communications services.

The net loss in the fourth quarter, after acquisition costs, was $18 million, or 11 cents a share. Gross profit margins in the quarter checked in at 71 percent.

During a conference call with analysts, Chief Financial Officer Jack Acosta warned that first-quarter sales will be flat or as much as 7 percent below the $81.1 million it recorded this quarter. He said earnings per share would come in at breakeven or 1 cent a share.

Analysts were expecting it to post sales of $90.2 million and earnings of 3 cents a share.

"We're cautious about the current macroeconomic conditions," Acosta said. "While the pipeline appears to be very strong, we don't really know what short-term impact this will have on our business."

Acosta said fiscal 2002 sales would come in between $360 million and $400 million with earnings of between 14 cents and 20 cents a share.

First Call consensus was looking for sales of $437.1 million and earnings of 19 cents a share.

"We see the majority of our growth in 2002 coming in the second half," Acosta said. "Sales in the second quarter will be slightly higher than the first quarter and earnings per share should improve by 1 cent a share."

Separately, Portal Software announced that Acosta would be retiring from his post later this year.

Ahead of the earnings report, Merrill Lynch analyst Mark Fernandes predicted the company would earn 3 cents a share on sales of $82 million.

"There's been a lot of uncertainty lately in the server provider market," he said. "I'm expecting the stock to trade sideways for a while mainly because they're so dependent on that market."

Prudential Securities analyst Michael Turits was also expecting a profit of 3 cents a share on sales of $82.4 million.

"This company is facing some growth challenges right now," he said. "They have to maintain fairly constant average selling prices, which we're not sure they can do right now considering the consolidation in the server provider market and very few if any new entrants."

In the fiscal year, Portal Software pocketed $22.6 million, or 13 cents a share, on sales of $268 million, up 160 percent from fiscal 2000 when it lost $7.6 million, or 5 cents a share, on sales of $103 million.

"Although we are healthy and profitable, we are watching our expenses very carefully," Chief Executive Officer John Little said during the call. "Our goal is to run a tight ship?so we leave this uncertain time with an even healthier business."

Little said Portal added 40 new customers in the quarter, bring its total customer base to more than 420 companies including 20 of the top 25 telecom companies in the world.

On a geographic basis, North America sales represented 54 percent of total sales in the quarter, while Europe and Intercontinental sales chipped in 25 percent and 21 percent, respectively.

The stock enjoyed a brief rally Tuesday after announcing Vodafone UK (NYSE: VOD) would use its Infranet software in its rollout of GPRS (General Packet Radio Service), an improvement to the GSM mobile communications system that supports data packets.

Earlier in the quarter, it landed a key licensing deal with AOL-Time Warner (NYSE: AOL).

However, the stock is still miles away from its 52-week high of $86 established last February. The stock slipped to a low of $4.75 in December.

Thirteen of the 15 analysts tracking the stock rate it either a "buy" or "strong buy."