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Informix audit spurs stock plunge

As Nasdaq works to de-list Informix, the database maker likely will double the amount of its restated 1996 financial results and add 1995 to its audit as well.

    As the Nasdaq works to de-list Informix (IFMXE) as a result of the company's delay in filing a quarterly financial report and its subsequent announcement that it would likely double the amount of its restated 1996 financial results and add 1995 to the audit, the company's stock today dropped as much as 30 percent in morning trading.

    Informix's stock, which dropped to a day low of 6-1/2 under heavy volume, recovered some of its losses to close the day at 7-11/32, down 1-15-32 from Friday.

    Meanwhile, Nasdaq has initiated stock de-listing proceedings as a result of the company's delay in filing its second quarter financial report, but Informix is requesting a hearing to seek an exception to Nasdaq's de-listing requirements in light of its efforts to restate its 1995 and 1996 financial statements.

    Informix also said it is expanding its previously announced audit to include 1995 due to "errors and irregularities" in previous years' financial reports.

    Informix's stock dropped as much as 30 percent, to 6-1/2 from Friday's close of 9-7/16. It is the most active stock on the Nasdaq, with more than 13 million shares trading hands.

    The maker of object-relational databases announced in August that its 1996 financial statements would be restated. At the time the company said the restatement would decrease revenue and net income from previously reported amounts by an estimated $70 to $100 million.

    But now the company says its 1996 results will reflect a decrease in excess of $200 million.

    And, after finding irregularities and errors in certain types of revenue recognized from reseller channel transactions in both 1995 and 1996, Informix said its 1995 revenues also will be restated.

    These specific revenue transactions reached approximately $100 million in 1996--within the range originally estimated--and approximately $20 million in 1995.

    The company also noted that the restatement for 1995 and 1996 will affect financial statements and information reported for the first two quarters of fiscal 1997.

    This news comes on the heels of a larger-than-expected loss for the second quarter and a shake-up in the company's top management slot.

    Informix reported revenues of $164.7 million for the second quarter ended June 29 and reported a loss of $120.5 million. The company also took a $62.1 million restructuring charge in the quarter.

    In July CEO Phil White resigned as chairman and left Informix's board of directors. Bob Finocchio, who replaced White as CEO, was elected to the chairman's post.

    White had been under fire from angry shareholders; some of whom had called for his resignation at the annual shareholder meeting in May. Investors blamed White for Informix's sinking fortunes in recent months, as it shifted its marketing and technical efforts toward its new object-relational Universal Server while scaling back its work on its bread-and-butter Online Dynamic Server database.

    Informix also has been hit with a handful of class-action lawsuits. Investors charge the company misrepresented its revenues, prospects for profitable growth, and other financial results.

    In addition, more cutbacks are on the way. The Informix workforce, at 4,630 in the first quarter, was down to 4,190 at the end of the second quarter. The company said it will continue to consolidate throughout the third quarter, and will lay off an additional 10 to 15 percent of its workforce, primarily in sales and marketing positions, eventually cutting the company back to about 3,600.

    Another restructuring charge will be taken in the third quarter to cover additional severance costs and asset writedowns, according to the company.

    But some analysts are not convinced that the cutbacks go far enough. "Given the lack of visibility in terms of revenue for the year, we are concerned that these head-count reductions may not be enough?We estimate that head-count reductions to about 3,000 people would bring total operating expenses yearly to about $650 million," right in line with projections, said a recent Salomon Brothers report.

    "Admittedly and regretfully, we are providing only rough estimates based on work already completed,'' Finocchio said in a statement. "But I believe keeping our shareholder, customer, and employee constituencies informed is the right thing to do."

    "I, more than anyone, want to complete the restatement processes as quickly as possible, but it's important that we do it right," added Finocchio.