Sterling jumps on 4Q outlook

Shares of Sterling Commerce (NYSE: SE) jumped 12 percent Wednesday after the company said it sees fourth quarter results a little bit better than analysts forecast. BancBoston Robertson Stephens upgraded the stock to a "long-term attractive" from "market performer."

Sterling was up 2 7/16 to 23 7/16 in late morning trading.

On Tuesday, the e-business software vendor said it expects to report fiscal fourth quarter earnings of 41 to 42 cents per share, not including one-time charges or results from the XcelleNet business being spun off. First Call's survey of 17 analysts predicted a profit of 39 cents per share for the quarter ended Sept. 30.

Preliminary results indicate fourth quarter revenue, excluding XcelleNet, ranging between $157 million and $159 million, better than than the $151 million expected by analysts. Including XcelleNet, Sterling expects total revenue of $173 million to $176 million. Both sides of Sterling's business -- software and services -- did well, the company said.

The results demonstrate Sterling is recovering from its third quarter stumble, said Warner C. Blow, president and CEO. "The company was able to close the majority of the large quarter-end transactions that were delayed at the end of the third fiscal quarter." he said. "We better managed delays in sales cycles associated with Y2K and intensified our efforts on pursuing and closing business that is not being impacted by Y2K."

Sterling expects to report fourth quarter shares outstanding of roughly 85 million, down from previous periods because of stock buybacks.

Final results won't be available until Sterling files the required form 10K in mid-November, the company said.

Not all analysts were ready to cheer Sterling.

"While we are encouraged by the solid financial performance and SE's strength in its outsourcing and Internet related initiatives, we continue to wait for stronger top-line outperformance and more visibility with regard to issues concerning Y2K, its traditional EDI business, and Internet-related products," said PaineWebber analyst James Preissler in a report. "We believe details about these areas could be addressed on the quarterly conference call and we plan on providing more details afterwards."

Of 21 analysts surveyed by First Call, 11 rate Sterling the equivalent of a "hold", eight have the stock as a "moderate buy" and two recommend it as a "strong buy".