Sterling meets 4Q target

Sterling Software (NYSE: SSW) met Wall Street's lowered estimates in the fourth quarter.

After market close Thursday, the business software vendor reported fiscal fourth quarter net income of $41.3 million, or 47 cents per share, excluding one-time costs. In September, Sterling told analysts to expect that figure, compared to the previous consensus estimate of 52 cents per share, because of expenses related to acquisitions and a restructuring of Sterling's application management division.

Excluding one-time charges and acquisition-related writedowns, Sterling earned $47.1 million, or 54 cents per share, for the quarter ended Sept. 30. The company had predicted a per-share profit of 53 cents on that basis.

Sterling recorded one-time expenses of $117.3 million related, or $100.7 million after taxes. Including amortization and non-recurring charges, Sterling lost $59.4 million, or 71 cents per share.

Fourth quarter revenue rose to $230.4 million, a 20 percent increase from $192.7 million a year ago, when Sterling earned $39.9 million, or 46 cents per share. Systems management revenue led the way with a 70 percent increase year-over-year, to $105.5 million from $62.2 million.

Federal systems business fell to $40.9 million from $42 million in the fourth quarter of fiscal 1998.

Application management revenue dropped 5 percent to $84 million, as Sterling reorganized the unit. Although application management products revenue rose 16 percent year-over-year, services for the division fell 29 percent.

For the full fiscal 1999, Sterling earned $143.7 million, or $1.64 per share, on revenue of $807 million. That profit figure does not include non-recurring expenses. Including one-time costs, Sterling lost 13 cents per share for the fiscal year.

The company spent $72.4 milion to buy back 3.5 million shares in September. Under the previously announced buyback program, Sterling can repurchase up to 5 million shares.

Shares of Sterling fell 9/16 to 23 5/8 in regular trading prior to the quarterly report. Among a half dozen analysts polled by Zack's Investment Research, four recommend Sterling as a "strong buy", one has the equivalent of a "moderate buy" rating, and one maintains a "hold" advisory on the stock.>