Vitria stock tanks after clients cancel orders
Shares of Vitria Technology hit a new 52-week low after the e-business software provider announces that it will post an unexpected fourth-quarter loss because of canceled orders.
The Sunnyvale, Calif.-based company issued a statement after the close of regular trading Wednesday lamenting that some large customers postponed or canceled orders in the last few days of the fourth quarter. Vitria expects to announce official fourth-quarter results Jan. 30.
Vitria expects to lose 1 cent to 3 cents per share, excluding expenses, on revenue of $39 million to $41 million. Wall Street had been expecting the company to earn 1 cent per share.
Analysts wasted no time in lambasting Vitria--despite the fact that it's part of a growing club of companies that have suffered canceled orders in recent weeks. Microsoft, Compaq Computer, Inktomi and other large technology companies have also slashed earnings estimates for the quarter that ended Dec. 31, based in large part on sluggish demand from consumers and business clients--particularly telecommunications companies.
Merrill Lynch analyst Christopher Shilakes maintained his intermediate term "accumulate" rating but lowered his 12-month target price to $9 per share. His pessimism stems from Vitria's reliance on the telecommunications, or telco, sector--a relationship Shilakes called a "double-edged sword." Vitria, like many others, has gotten mired in the "telco quicksand," he wrote.
"The company's telco focus quickly established it as a serious integration technology vendor," Shilakes wrote in a research note issued Thursday. "However, the company was not able to take all its eggs out of the telco basket before it tipped. Going forward, management has significant challenges," including a tarnished reputation among investors, heightened competition among rivals, and deteriorating morale among employees.
Based largely on the negative Wall Street reports, Vitria stock sank as low as $3.88 per share on Thursday, touching down with a new 52-week low. It made a modest midday rebound to close regular trading at $3.97. That's down 50.4 percent since its closing price on Wednesday and 96.3 percent since February, when it reached its 52-week peek of $106 per share. The stock is down 48.8 percent since the beginning of the year.
Although the stock lost more than half its value in midday trading Thursday, several analysts warned that it may slip further. Many were concerned that Vitria executives failed to express much optimism about when the company would make a profit and lessen its reliance on the telecommunications sector.
"We are maintaining our 'neutral' rating on the stock and believe investors should continue to take a cautious posture on this name," wrote Ken Kiarash of the Buckingham Research Group. "Even though the stock would most likely decline substantially today and create a perceived 'value' and entry point, we believe Vitria's attempts to diversify outside the telco space will take several more quarters, and the weakened state of the company's core customer base will create execution difficulties in the near term."