Convergent misses 3Q estimates, plunges

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Convergent Communications, Inc. (Nasdaq: CONV), tumbled 15 percent Wednesday after missing third quarter estimates by a nickel. The company lost $1.06 a share.

The company said the launch of its customer loyalty platform was pricier than expected, and higher costs could continue into the fourth quarter.

Shares in the enterprise network carrier software maker were down 2 to 11 3/4 Wednesday morning, up slightly from their sharp tumble in August after Convergent announced its financial officer had resigned.

Revenue of $42.4 million was up 90 percent over third quarter 1998 revenue of $22.3 million, and up 11 percent over the previous quarter. Net loss was $26.4 million, or $1.06 a share, much wider than the $15.4 million, or $1.11 a share for 1998's third quarter. First Call was expecting a loss of $1.01 a share.

The company's EBITDA loss for the third quarter of 1999 was $16.5 million, compared to a $7.9 million EBITDA loss reported for the three months ended Sept. 30, 1998. EBITDA is earnings before interest (net), taxes, depreciation, amortization and other income.

The company said build out of its core businesses, including its Cisco-powered carrier network, and the implementation of its $7 million customer loyalty platform were the main expenses for the quarter. The rollout of the customer loyalty platform contributed to higher expenses in the third quarter, which it said should subside toward the end of the fourth quarter and the beginning of the first quarter of 2000.

The company said strategic investments have shown early returns: Revenue from the company's data services segment increased 110 percent on a sequentially to $4.5 million and carried a 67 percent gross margin during our third quarter. Data and voice services, another growth area, contributed around $16.5 million for the quarter, compared to $10.1 million in 1998.