BroadVision slides on analyst concern

Shares were down $1.88 to $13 on the Nasdaq. Later, the stock was down $1.44, or nearly 10 percent, to $13.44. The company announced after Thursday's bell that it sees little revenue growth in the first quarter, but stuck to its earlier forecast of full-year revenue growth as high as 52 percent.

The company's fourth-quarter results were mixed. While revenue of $137 million was above most estimates, earnings of 2 cents a share fell short of the consensus estimate by 3 cents. Management said business remains strong, and the company is in the midst of a new product cycle.

The increase in operating expenses took many analysts by surprise; the total of $92.5 million was about $20 million greater than had been expected.

Bank of America Montgomery Securities analyst Greg Vogel downgraded the stock to "buy" from "strong buy," expressing surprise at "the magnitude of the 38 percent sequential increase in operating expenses leading to the 3 cents a share in earnings shortfall."

"We believe that the increased expenses represent a correctable execution issue, but it will likely take a few quarters to return to 15 percent operating margins, prompting us to downgrade the stock while corrections are made," the analyst wrote.

BroadVision management attributed the increase in expenses to:

• Poor forecasting with regards to head count additions resulted in an increase of approximately $4 million.

• Commissions for the top sales people resulted in a $3 million increase in spending.

• Growth-related inefficiencies resulted in $3 million in expenses; the company hired 1,000 people and did not have the infrastructure in place to manage the associated costs.

• The opening of new offices had an unexpected expense of $1 million.

But Friedman, Billings, Ramsey analyst David Hilal noted that these four areas only account for about half of the expense average.

"We are concerned that aside from the company's poor forecasting abilities, the company's expense structure may be ahead of its revenue growth," he noted.

Hilal maintained a "buy" rating but lowered some 2001 estimates and said he was cautious on the stock for the short term.

Goldman Sachs analyst Lilly Bahramipour reiterated her "market outperformer" rating and maintained revenue estimates for 2001, while reducing earnings estimates because of the expectation that a trend toward lower operating margins will continue.

Bahramipour also expressed concern with "near-term lack of visibility, product release transition, execution-related issues, and a less favorable macroeconomic environment dampening IT spending confidence," but added that she is confident about the company's broad product line and the new product cycle due to start in the next quarter.

The much-anticipated release of the BroadVision 6.0 platform upgrade appears to be on track for the end of March, and analysts believe it will be a positive catalyst for the stock with an improved long-term outlook.

Another positive for the company is its balance sheet, which remains healthy with $325.1 million in cash and short- and long-term investments.