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Upgrade, earnings ignite Sterling Commerce

Sterling Commerce (NYSE: SE) shot up 6 3/4, or 25 percent, to 34 Thursday, one day after it edged past analyst estimates in its first quarter.

The provider of e-business services and software reported fiscal first quarter net income of $27.3 million, or 34 cents per share, excluding one-time events. First Call's survey of 13 analysts predicted a profit of 33 cents per share for the quarter ended Dec. 31.

On Thursday, Advest Inc. upgraded the stock from a "market performer" rating to a "strong buy."

The first-quarter results fall in the top end of Sterling's quarterly preannouncement. Including a $50 million charge related to the pending sale of XcelleNet, Sterling lost 27 cents per share in the quarter.

First quarter revenue increased to $138.1 million, a 7.8 percent gain from $128 million in the year ago period. Internet-related business generated 48 percent of the company's revenue, compared to 31 percent a year earlier.

"We met or exceeded each of the goals we set for realigning our resources and building our business around our targeted growth markets," CEO Warner C. Blow said.

Products revenue slid 3 percent year-over-year to $41 million, with the company blaming Y2K effects and a slowdown in Sterling's older product lines. Support revenue improved 13 percent to $32 million. Services generated $64 million in business.

Shares of Sterling closed Wednesday's regular trading at 27 7/16, down 1 5/8 for the session. Among 19 analysts polled by Zack's Investment Research, nine rate Sterling the equivalent of a "hold", eight maintain "moderate buy" ratings, and two recommend the stock as a "strong buy".>