QAD warns of net loss

QAD Software caught a slight sniffle from the Asian flu and the software firm is feeling a bit of a new millennium hangover as customers mull over their plans for the century date change.

But also blame some of QAD's ills on the recent General Motors strike.

QAD recently announced the factors are the reason its second quarter earnings will be below analysts' estimates

QAD, in Carpenteria, California, is one of the top ten makers of client-server software systems known as enterprise resource planning software that automate business processes such as manufacturing and inventory management. One of its primary markets is the automotive industry.

So when United Auto Workers at GM's Flint Metal Center and Delphi Flint East facility went on strike this summer, QAD saw a number of pending deals put on hold.

"Based on management's initial analysis of the quarter's results and business conditions, QAD expects total revenue to increase approximately 18 to 19 percent from last year's second quarter total revenue of $40.2 million," QAD executives said in a prepared statement.

Wall Street was predicting revenue growth in the 38 to 40 percent range.

QAD executives said that the strike, a slowdown in sales in Asia, some Year 2000 issues, and its own expense control plan that has yet to yield a benefit, "will result in a net loss for the second quarter."

So far analysts are buying the story. Wall Street investment firms' ratings of QAD stock average between buy and hold. According to S&P, a consensus of projected earning from QAD are 10 cents per share for the recent quarter, 47 cents per share for 1999 fiscal year, and 73 cents a share in 2000.

"Is QAD headed for a fall?" asked AMR Research in Boston upon news of the report. "We don't think so. [QAD] notes that its worldwide sales force is chasing some 2,000 sales opportunities. Certain vertical [markets] remain very strong, especially medical and automotive. Nonetheless, management must return the company to profitability and solid revenue growth if QAD hopes to compete for big deals against SAP, Oracle, Baan, PeopleSoft, and J.D. Edwards."

AMR analysts explained that this is necessary because the "high end ERP deals create visibility and momentum that make it easier to sell to the smaller customers."

QAD is not alone in feeling the pull of outside forces on its earnings. Competitors like SAP also reported the Asian economic crisis and other factors are slowing growth in recent periods.

QAD is to release the final results after markets close August 20.