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Marimba hits low note on earnings warning

Shares of the software maker plunge 49 percent after it warns that earnings will fall short of estimates because of its inability to conclude several sales transactions.

    Shares of software maker Marimba plunged 49 percent Friday following its warning that quarterly earnings will fall short of analysts' estimates because of its inability to conclude several sales transactions.

    News of the disappointing results drove Marimba's stock to new lows. Shares fell $5.50, or 49 percent, to $5.63 by the 1 p.m. PT close of regular trading. Earlier in the session, its shares dropped 62 percent, setting a new 52-week low of $4.25.

    The Mountain View, Calif.-based company said Thursday that it expects revenue for the third quarter to be in the range of $10 million to $10.2 million, with a net loss of 13 cents to 17 cents per share, excluding charges of $585,000 for deferred stock compensation. Including the charges, the net loss is expected to be in the range of 16 cents to 20 cents a share, the company said in a statement.

    Analysts surveyed by First Call/Thomson Financial had expected that the company would post a profit of 4 cents a share.

    In addition, the company said that operating expenses for the third quarter are expected to be affected by a $2.1 million charge for a potential credit loss from a customer.

    Marimba, which makes software that lets companies deliver and update software over the Internet, attributed the lower-than-expected revenue to its inability to conclude several anticipated sales transactions during the quarter, as well as its need to expand the reach of its sales force. The company said it expects to finalize some of these transactions in its fourth quarter, ending Dec. 31.

    The company debuted on Wall Street last year with a blockbuster public offering. Marimba shares had hit a 52-week high of $68.87.

    On word of the earnings shortfall, a series of investment firms issued downgrades on Marimba's stock and trimmed their earnings forecasts.

    Analysts at Morgan Stanley Dean Witter cut their rating to "neutral" from "outperform," while Dain Rauscher Wessels analysts downgraded Marimba to "neutral" from "buy." Chase Hambrecht & Quist lowered its rating to "market perform" from "buy."

    "We believe that visibility into the pipeline of customers and timing of deals is somewhat cloudy," Chase H&Q analysts Jack Ripsteen and Velin Mezinev said in research notes. They cropped estimates for fiscal 2000 earnings per share to a loss of 22 cents from a profit of 13 cents and also cut fiscal 2001 earnings estimates to a loss of 31 cents from a profit of 25 cents.

    Morgan Stanley analyst Chuck Phillips said in notes that "it will take several quarters for Marimba to rebuild the sales force and have its reps be productive." Additionally, the company continues to have "relatively low visibility given its dependence on closing several large deals at the end of the quarter," he said.

    Marimba was a pioneer in the once-hot market for "push" technology, which in the mid-1990s was seen as one of the first "killer applications" on the Internet. Companies such as Marimba and PointCast Network delivered information automatically to a PC according to programmed preferences, eliminating the need to surf Web sites to gather specific news or information.

    As the demand for push weakened, Marimba repositioned itself and its flagship Castanet product as a means for corporations to manage software remotely over networks.

    In its second-quarter earnings statement, Marimba reported its first profits. At the same time, co-founder Kim Polese stepped aside as chief executive officer, handing the post over to John Olsen.

    The company also announced Thursday that Bob Maynard, its vice president of worldwide sales, has resigned to pursue other interests. Olsen has assumed the role of acting vice president of worldwide sales.

    Marimba expects to report third-quarter results Oct. 24.