Sybase reports mixed results

The database software maker reports better-than-expected third-quarter earnings but lower revenues and a sharp dip in licensing fees.

Mike Ricciuti Staff writer, CNET News
Mike Ricciuti joined CNET in 1996. He is now CNET News' Boston-based executive editor and east coast bureau chief, serving as department editor for business technology and software covered by CNET News, Reviews, and Download.com. E-mail Mike.
Mike Ricciuti
2 min read
Database software maker Sybase today reported better-than-expected third-quarter earnings, but lower revenues from one year ago and a sharp dip in database software licensing fees.

The company today reported third-quarter profits of 3 cents per share on revenues of $210 million. That compares with a loss of 8 cents per share on revenues of $233 million reported one year ago. The company was expected to break even for the quarter, according to First Call consensus estimates.

On a more ominous note, Sybase reported a significant drop in database license revenue, down 19.4 percent to $98.76 million vs. $122.55 million one year ago. Revenue from services was up slightly, to $111.5 million from $110.47 million.

Analysts voiced concerns that the company is attempting to boost its bottom line by cutting expenses in the absence of growing profits.

"The license fees were really disappointing, much more than I expected," said Julie Tylman, an analyst with Merrill Lynch. "Sybase tried to make it up by cutting costs, but that is not very positive or encouraging."

Still unclear is whether the license revenue slowdown is related more closely to an overall database software slowdown or to Sybase's own marketing troubles.

Tylman said she believes the company's Adaptive Server Enterprise database, which Sybase sells to large corporate customers, has not caught on with new buyers. The company is concentrating its sales efforts on specific vertical markets, such as financial services and telecommunications.

Last month, Merrill Lynch lowered its estimates for Sybase's earnings per share for the rest of the year, citing fears that the company is struggling to bring in new business and is cutting deals on software licenses.

The bright spot in Sybase's product lineup continues to be its mobile and embedded database products. Earlier this year the company created a separate division to peddle mobile wares, and that strategy now appears to be paying off.

But Tylman and other analysts said that mobile computing products, which generate paper-thin profits, are still too low in sales volume to make a substantial difference in Sybase's bottom line.

To help boost sales of mobile products, Sybase today announced a new marketing program to build sales relationships with third-party vendors, including 3Com, Hewlett-Packard, and others.

Analysts expect that the database market will continue to consolidate around three clear leaders--Oracle, IBM, and Microsoft.