Pervasive sees Tango upbeat, but less cash in 3Q

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After scaring off most investors with a radical business realignment in its previous quarter, Pervasive Software Inc. (Nasdaq: PVSW) fell 22 percent Friday after an earnings miss in its second quarter.

The company also warned growth would be slow in the third quarter because of lower-than-expected database revenues and software orders.

Shares in Pervasive, which develops mobile software applications, fell 3 9/16 to 11 15/16. The stock took a sharp downturn in October after it met expectations and reported soft revenue growth, and announced plans to revise its business model. The company intended to shift its focus from the database business to concentrate on its "Tango" product to tap into a growing market for e-business applications.

Two firms downgraded Pervasive on Friday. First Albany cut the stock to "neutral" from "buy," and Robertson Stephens lowered the stock to "market performer" from "long-term attractive."

Net loss for the quarter was $1.2 million, or 7 cents per share, wider than the net loss of $700,000, or 5 cents per share for the same period last year. The company also missed the Street's expectation's; First Call's consensus estimate had predicted the company to lose just 3 cents a share.

Pervasive said second quarter revenue was of $16.2 million, a 13 percent increase over the year-ago period when the company reported revenues of $14.1 million.

President and Chief Executive Ron Harris said Pervasive's year-over-year revenue growth for the second quarter was not as strong as in previous quarters, and that the company's third quarter revenue would be the same as or less than the second quarter's. Analysts expect a loss of 19 cents per share for the third quarter, according to First Call.

"It now appears that our database revenues were affected by the recent transition of our sales force leadership, market growth being slower for packaged client/server applications, and customers ordering less software due to their Y2K priorities," Harris said.

Harris said Tango revenue grew strongly in the quarter, more than doubling sequentially from the first quarter. Pervasive's database business remains profitable.