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Macromedia misses its mark

The software developer misses analyst estimates by a wide margin and opts against providing guidance for future quarters. It also says it laid off 200 workers in the quarter.

    Macromedia fell well short of analysts' estimates in its fourth quarter Wednesday, earning $8.4 million, or 16 cents a share, on sales of $89.1 million. The company also announced that it laid off 200 employees in the quarter.

    First Call consensus pegged the Web authoring software developer for a profit of 20 cents a share in the quarter.

    Macromedia shares closed up $2.88, or 12 percent, to $26.58 ahead of the earnings report before tumbling to $24.01 in after-hours trading.

    The $89.1 million in sales marks only a 3 percent improvement from the year-ago quarter when it earned double the profits--$16.8 million, or 30 cents a share, on sales of $86.4 million.

    Chief Executive Officer Rob Burgess said the company initiated cost-cutting measures this quarter in an effort to return operating profits above 20 percent in future quarters.

    As part of these cuts, Burgess said the company handed out pink slips to 200 employees, or about 10 percent of its staff, in the quarter, reducing its work force to roughly 1,700 employees. Macromedia previously announced that it would have layoffs, but it did not give numbers.

    But he was loath to offer any guidance for the first quarter or the fiscal year despite repeated questions from analysts during a conference call Wednesday afternoon.

    "We're not seeing anything dramatic," he said. "We're dealing with very uncertain economic times. We want to make the right long-term decisions. We're sorry (because) the lack of visibility puts you (analysts) in an awkward position. But it's the best thing for our company at this time."

    Steven Frankel, an analyst at Adams, Harkness & Hill said the company's lack of guidance wasn't much different from what competitor Adobe Systems said in its most recent conference call.

    "It's the same thing," he said. "It's a tough environment right now, and it's tough for them to figure out. I've got some work to do now. I'm doing some soul searching as we speak. But it's always been guesswork."

    Other analysts were more candid about the lack of visibility and the company's disappointing results.

    Before the conference call began, listeners tuning into the call through the Webcast could hear a pair of analysts--obviously unaware that their comments could be heard--bemoaning the poor earnings and the company's tight-lipped stance.

    "They totally crapped the bed," one unidentified analyst said.

    To this, the second analyst said: "I just got hosed on this one."

    In January, Macromedia announced a $360 million merger with Allaire, a deal designed to bolster its catalog of back-end application development software.

    Ahead of the earnings report, Banc of America Securities analyst Greg Vogel predicted Macromedia would earn 17 cents a share on sales of $87.5 million.

    In April, UBS Warburg analyst Benjamin Reitzes slashed his 12-month price target on the stock from $18 to $26 a share and lowered his fourth-quarter profit estimate to 20 cents from 24 cents a share.

    "We believe that Macromedia is not only facing tougher overall economic conditions, but also the rapid decrease in demand for Web site creation," Reitzes wrote in a research note.

    Dain Rauscher Wessels analyst Tonia Lee initiated coverage of Macromedia with a "neutral" rating this quarter, saying that "while we expect limited visibility in the first half of 2001, planned upgrades to Allaire's ColdFusion server product could provide a catalyst for more accelerated revenue and earnings growth in the second half of 2001."

    Last quarter, Macromedia posted a profit of $16.2 million, or 29 cents a share, on sales of $103.3 million.

    The stock moved as high as $120.88 in July before falling to a low of $13.38 in April.

    Nine of the 15 analysts tracking the stock rate it a "hold."