STOCKS TO WATCH: ION Networks, Wind River Systems and WorldCom

The network security provider figures to falter Friday after it posted a wider-than-expected loss in its fourth quarter, losing $2.7 million, or 19 cents a share, on sales of $5.7 million.

Its shares closed up 2 19/64, or 38 percent, to 8 11/32 ahead of the earnings report but tumbled to 7 3/4 in after-hours trading.

The lone analyst following the stock predicted it would lose 6 cents a share in the quarter.

Company officials said the wider-than-expected loss was primarily due to a non-cash in-process research and development charge of $3.5 million associated with the acquisition of SolCom in the fourth quarter as well as investments in sales and marketing personnel and research and development.

The $5.7 million in sales marks a 75 percent jump from the year-ago quarter when it lost $6 million, or $1.10 a share, on sales of $3.2 million.

ION officials said the watered down fourth-quarter results were impacted because some shipments made in the quarter were not recognizable as revenue due to the newly codified revenue recognition standards issued by the Securities and Exchange Commission. As a result, ION will record revenue of approximately $1.1 million that it expected in the fourth quarter in future periods sometime in fiscal 2001.

This one looks like a typical sell-on-the-news job as the Internet software maker fell in after-hours trading Thursday despite topping Street estimates by 3 cents a share in its first quarter.

In the quarter, it made $7.8 million, or 11 cents a share, on sales of $91.6 million.

First Call Corp. consensus expected the Internet software developer to earn 8 cents a share in the quarter.

The stock closed up 2 3/4, or 8 percent, to 39 ahead of the earnings report but fell 3/4 to 38 1/4 in after-hours trading.

Including $9.6 million of amortization of goodwill, purchased technology and other intangibles and $30.7 million of acquisition related charges, Wind River lost $32.4 million, or 48 cents a share, in the quarter.

The $91.6 million in sales represents a 34 percent improvement from the year-ago quarter when it earned $7 million, or 11 cents a share, on sales of $68.3 million.

Some positive comments from WorldCom officials may spur the telecom giant higher Friday.

Late Thursday, WorldCom said it won't consider tracking stocks or spin-offs to boost its lackluster share price because it expects the stock to rebound once regulatory concerns about its pending acquisition of Sprint Corp. (NYSE: FON) are resolved.

"Once the Sprint issue is over, the stock will take care of itself," CEO Bernie Ebbers told Reuters before the long-distance telephone company's annual shareholder meeting.

WorldCom has no current plan to pursue tracking stocks, spin-offs or other so-called methods of financial engineering that have become popular among telecommunications companies, such as AT&T Corp. (NYSE: T).

"Financial engineering by definition is bad," Ebbers said. "Typically you do things because they make good business sense, and I don't see any good business sense in doing that."

Shares of WorldCom, the No. 2 U.S. long-distance provider, have fallen about 34 percent in the past year amid investor concerns about the company's declining revenue growth rate, regulatory scrutiny of the Sprint deal and general weakness in the stock market.

Its shares closed up 1 1/8 to 38 3/4 Thursday.