Shares of New Era of Networks take a beating of nearly 27 percent after the software maker issues an after-hours earnings warning that it will fall far short of expectations.
The Denver-based company said it expects fourth-quarter revenue of $40 million and a loss of 35 cents per share, including a charge of 10 cents per share to cushion bad debts. New Era also forecasts revenue of $188 million for the full year and a loss of 15 cents a share. The company will take an unspecified fourth-quarter restructuring charge.
Wall Street expected the company to report earnings of 11 cents a share for the quarter and 28 cents for the year, according to a survey of eight analysts by First Call--a far cry from the company's newly projected losses.
Before the after-hours announcement, company officials had also been forecasting a profit of 11 cents per share. They previously expected to make $59 million in revenue for the fourth quarter and $209 million for the entire year, compared with the $55.2 million in revenue it generated in the previous quarter and $126 million for the previous year.
The e-business software and consulting company attributed the glitch to the "unusually high number of customers and prospects" that postponed or deferred their purchasing decisions, CEO Rick Adam said in a statement.
Several prominent law firms, including New York-based Milberg Weiss Bershad Hynes & Lerach, promptly filed class-action lawsuits against the company on behalf of irate investors.
In a news release issued Friday afternoon, Los Angeles-based law firm Weiss & Yourman announced it was suing the company and several officers and directors for violations of federal securities laws. The complaint charges that New Era executives gave investors "false and misleading financial reports which materially misrepresented the financial condition" of the company, in violation of the Securities Exchange Act of 1934.
The root of the complaint involves an announcement by New Era on Oct. 18 that it had posted "record" revenues for the third quarter of fiscal year 2000.
"These purported record revenues, however, were based on the company's practice of selling its software to customers in exchange for barter arrangements or private equity investments in the customer and then booking the sale as revenue," Weiss & Yourman lawyers stated.
On Nov. 14, New Era stated in its third quarter fiscal 2000 10-Q form filed with the SEC that almost 20 percent of its revenues for third quarter consisted of nonmonetary transactions in lieu of cash sales. That caused the stock to lose roughly two-thirds of its value within two days. The stock closed at $19.88 on Nov. 20, dropping to $6.56 by Nov. 22.
The lawyers complained that the company "buried" that fact instead of telling investors outright at an earlier date.
The stock continued its downward spiral on Friday. In after-market trading, the company's shares fell $1.47 to $4.03, making it the largest percentage loser on the Nasdaq after the markets closed. In regular trading hours, New Era fell 94 cents to $5.50.
New Era will officially report fourth-quarter earnings on Jan. 23.
The top five most active stocks in after-hours trading on the Nasdaq Friday were as follows: Cisco Systems on volume of 2.39 million shares, up 18 cents; Intel with a volume 1.84 million, down 6 cents; Microsoft on volume of 1.61 shares; Oracle, which exchanged 1.07 million shares, up 12 cents; and Mcleod USA did volume of 1.03 million shares, up 44 cents.