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WebMethods joins chorus of B2B warnings

The company plans to report a wider first-quarter loss and revenue well below targets, capping a rough week for the business-to-business software sector.

WebMethods on Friday said it plans to report a wider first-quarter loss and revenue that will fall sharply below targets, capping a rough week for the business-to-business software sector.

Citing delayed customer spending, the company now expects to post a loss in the range of 9 cents to 10 cents a share for the quarter and revenue of approximately $55 million. Analysts surveyed by First Call expected the company to lose 2 cents a share and report revenue of about $63.5 million for the quarter that ended June 30.

WebMethods, based in Fairfax, Va., also said it laid off about 160 employees, or about 15 percent of its work force, to save money. The job cuts will be completed by the close of business Friday.

The company expects to take a one-time restructuring charge during its second quarter related to the reduction efforts, and said it will likely take additional steps to further reduce expenses.

"This is the first time in our company's history we did not show quarter-over-quarter growth," Chief Executive Phillip Merrick told analysts, investors and reporters during a conference call Friday morning. Like many other technology companies, WebMethods "did not see any signs of improvement" in customer spending, especially in the United States, he added.

Executives said while the quarterly results are disappointing, they still see growing demand for its products.

"I want to reinforce that while we're disappointed in last quarter's results, we're certainly not discouraged," Merrick said. During the quarter, the company signed 60 new customers including Adobe Systems, Applied Materials, Bank of America and others. Despite the customer wins, WebMethods experienced weakness across all industry segments including financial services, telecommunications, chemical and manufacturing.

Earlier this year, the company was humming a very different tune. Around the time WebMethods turned its first profit in January, Merrick stated that the software integration market was unaffected by any slowdown in technology spending, and even raised revenue projections.

The 4-year-old company, whose enterprise-software integration tools help customers tie existing systems with online marketplaces or within private exchanges, is the latest player in the struggling business-to-business software sector to warn of softer sales to come.

Earlier this week, a number of software makers that compete in that sector and in the development of online marketplaces, including BroadVision and i2 Technologies, also warned of sluggish sales.

On Tuesday, Dallas-based i2 said it expects to miss revenue targets and post a bigger second-quarter loss because of challenging market conditions. Web site software maker BroadVision, which has been edging its way into the business-to-business market, said it expects to miss second-quarter expectations by a wide margin, posting a loss of between 17 cents and 20 cents per share.

WebMethods is scheduled to release quarterly results July 25. Its stock was trading down $1.56 to $14.20 in premarket trading on the Island ECN, but in morning trading on the Nasdaq, it was up 39 cents to $16.15.