Sybase on a rebound run

Last October, Sybase (SYBS) management was talking about how difficult it was to crawl out of a hole. Today the company is boasting that its comeback is for real, bolstered by better-than-expected earnings results for its third quarter.

The relational database software maker today posted earnings of $5.2 million, or 7 cents per share, for the quarter ended September 27, slightly better than Wall Street estimates and a far cry from the loss of 69 cents per share reported one year ago.

Wall Street expected the company to post a 6-cents-per-share gain, according to a First Call's consensus estimate.

Revenues of $244.2 million in this most recent quarter bested last quarter?s $237.6 million, but fell short of year-ago sales of $250.2 million.

Last quarter, the database software maker posted its third consecutive profitable quarter, but missed Wall Street expectations as sales continued to slump.

This quarter was a different story, as database sales rose 5 percent over the previous quarter, and 1 percent year-over-year.

Sybase can even boast of having cash in the bank, as cash on hand at quarter?s end totaled $229.9 million, up $31 million since June.

Sybase is trying to make a technology comeback. The company, once known for its technology prowess, fell onto hard times in recent years as its SQL Server 10 database was roundly criticized for poor performance and spotty quality.

In the third quarter, Sybase shipped the first pieces of an entirely new database and tools framework, called the Adaptive Component Architecture. The architecture, which supports Java and ActiveX component development, includes the Adaptive Server Enterprise 11.5 database and the Jaguar CTS component transaction server, along with PowerBuilder 6.0 and PowerJ development tools.

Adaptive Server has won praise from customers and analysts alike, and many observers feel it has the potential to attract both new customers and repeat business from existing accounts.

More importantly, Sybase is poised to take over the No. 2 slot in the database software market from Informix Software, which is still reeling from financial disaster and subsequent management turnover.

In a recent report, investment banking firm Salomon Brothers said room exists for a second successful player in the database business--behind market leader Oracle--and that Sybase is the most likely candidate.

But the company still faces serious challenges from Oracle and from IBM, which is showing renewed vigor in the database market--not to mention everyone?s most-feared competitor, Microsoft.

Mitchell Kertzman, president and CEO of Sybase, said his company is showing renewed strength in server-based license revenue for its software, buoyed by the recent introduction of the Adaptive Server Enterprise 11.5 relational database upgrade.

He said his goals upon taking over the reins of the company last year were to return Sybase to sustained profitability, introduce new products to the market, and grow revenue. "We've done the first two," Kertzman said.

Sybase's newfound steam in the database market is not coming at the expense of traditional rival Informix, Kertzman said. He did, however, note one Sybase customer win over Informix, with one of the biggest retail chains in Mexico. Informix traditionally has shown strength in the retail chain market, but Kertzman said Sybase could exploit Informix's financial woes going forward.

Sybase will continue to roll out new products as the year closes, with the next version of its PowerBuilder application development tool set scheduled for general availability in November. PowerSite, a new Web-based development package, also is scheduled to ship in the fourth quarter.