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Verity earnings disappoint

Slowing sales mean a much larger fourth-quarter loss than Wall Street expected from the search engine software company.

Search engine software company Verity (VRTY) today posted a much larger fourth-quarter loss than Wall Street expected, as sales slowed.

Verity, which provides search-and-retrieve applications for the enterprise and the Internet, posted a fourth-quarter net loss of $6 million, or 55 cents a share, for the period ending May 31. That compares with net profits of $350,000, or 3 cents a share, for the year-ago period.

But excluding one-time acquisition charges of $4.9 million, in part relating to its acquisition of FTP Software's Keyview product line, Verity would have posted a net loss of $1.2 million, or 11 cents a share. Wall Street had expected the company to post a loss of 5 cents a share.

But the company's top executive said profitability may arrive in the second half of 1998.

"The first half of the year will still see Verity in the red as we absorb the 50-plus individuals that came from our acquisitions," said Philippe Courot, chairman and chief executive. "But we expect to become profitable in fiscal 1998."

The company expects to leverage its Keyview products and generate more revenues through aggressive licensing to original equipment manufacturers and other search vendors in the second half of fiscal 1998.

Meanwhile, revenues for the quarter increased 11 percent to $11.1 million for the quarter, up from $10 million for the year earlier.

Software products revenues rose 5.8 percent to $8.8 million for the quarter compared to the previous year. And revenues from services jumped 37.4 percent to $2.3 million, up from the same period a year ago.

Verity's quarter-to-quarter revenue growth has been spotty for the past year and the company has yet to pull strongly ahead on profits.

For the year, it reported a net loss of $17.9 million, wider than the previous year's loss of $313,000. Verity acquired Cognisoft in January for $10 million to combine Cognisoft's IntelliServ application server software with Verity's search engine. That move will bring Verity into the push technology arena.

Revenues rose to $42.7 million for the year, up from $30.7 million a year ago.