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webMethods bullish on outlook

    webMethods (Nasdaq: WEBM) shareholders could well be asking: What economic slowdown?

    "The general market environment seems solid," CEO Phillip Merrick said Wednesday night. "And we've not seen anything in our business that suggests we're going to be impacted."

    Merrick was speaking to analysts during a conference call, following the release of third quarter results for webMethods. The vendor of software for connecting business applications and building online exchanges raised expectations for the fourth quarter and fiscal year.

    Shares of webMethods traded at 90 in afterhours activity on the Island ECN, following the conference call. webMethods stock fell $5.50 to $85.88 in Wednesday's regular trading ahead of the report.

    webMethods now sees fiscal 2001 revenue of $205 million, which would require fourth quarter sales of $65.8 million, 16 percent more than the $56.9 million predicted by earnings tracking firm First Call's analyst survey. webMethods expects to earn up to 6 cents per share in the fourth quarter, CFO Mary Drudi told analysts.

    First Call consensus predicted a fourth quarter profit of a penny per share.

    Revenue in fiscal 2002 should be range between $320 million and $330 million, Drudi said. First Call called for 2002 revenue of $306.05 million.

    "The fact that guidance went up as much as it did in this challenging environment is good," said Robert Fontana, analyst with Wachovia Securities. "It's kind of a pleasure to not have to go through and figure out where the problems are. webMethods seems to be hitting on all cylinders."

    webMethods easily topped analyst estimates in the third quarter. The company reported fiscal third quarter net income of $2.7 million, or 5 cents per share, excluding special charges. First Call was predicting a third quarter profit of a penny per share.

    Third quarter revenue increased 237 percent year-over-year to $59.4 million, surpassing First Call's consensus expectation of $51.29 million. License revenue rose 220 percent to $43.4 million.

    "Our financial strength is becoming increasingly important as customers become more selective," Merrick said.

    The company added 85 customers during the quarter, to finish December with a total of 550 clients.

    webMethods looks especially good compared to other companies that specialize in tying together different applications for large corporations, Fontana said.

    "There were four to six companies in this space who preannounced negative results in the fourth quarter," he said. "webMethods continues to distinguish itself with its results."

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