Macromedia hit hard

Macromedia posts a loss of $15 million, the second loss in a row for the multimedia and Internet software company.

CNET News staff
2 min read
Macromedia (MACR) posted a loss of $15 million today, the second loss in a row for the multimedia and Internet software company.

The company had warned investors last month of impending bad news for the fourth quarter ending March 31. The company today announced a net loss of 41 cents a share. That compares to a net profit of $6 million, or 15 cents a share, for the same quarter a year ago.

Even though Wall Street had been warned, analysts expected a substantially smaller loss. A consensus of eight analysts had forecasted a quarterly loss of 18 cents per share, according to the First Call financial report service.

Macromedia was also in the red last quarter, although it posted a substantially smaller loss of $4.6 million.

The company attributed this quarter's problems to delays of the release of its Director 6 multimedia authoring software suite. The company was counting on Director 6 for about half of its revenues for the quarter, president Rob Burgess said.

Instead, revenues plunged, dropping to $13.2 million for the quarter just ended, down from $34.6 million in the same quarter a year ago.

Because it had expected strong income from Director 6, the company had in fact increased its spending this quarter, spending 48 percent more on sales and marketing compared to last year. But then Director testing took longer than expected.

"We had a more aggressive development program and took more technological risk," said Burgess. "The Shockwave streaming technology affected the rest of the software and took a while to settle down."

Director 6 is now scheduled to ship in May.

In fact, Macromedia has had a rough fiscal 1997. The company ended with a net loss of $5.9 million or 16 cents a share for the year, compared to a net gain of $23 million or 59 cents a share for fiscal year 1996. First Call had predicted a profit of 6 cents per share for the fiscal year.

Macromedia laid off about 10 percent of staff last month but doesn't expect any more layoffs, according to Burgess.

To get back on track, the company is pursuing a six-point plan including a new corporate organization; a new management team; better expense control; more extensive Web distribution; reducing the number of its channel partners; and finally, focusing on market growth. The company's new organization calls for four divisions: graphics, Internet and multimedia authoring, learning, and audio/video.

The company must also adapt to a marked shift in the amount of its sales coming from the Windows market. For the fourth quarter, revenue from Windows products accounted for 44 percent of the total, while Macintosh accounted for 56 percent. Last year, Windows brought in only 34 percent of sales compared to 66 percent for the Mac.

The company reported its earnings after the close of market. Macromedia's stock closed today at 7-5/8, up almost a point.