BEA Revenue Decreases, Outlook Lowered

BEA reported Tuesday total revenues of $224.8 million, a decrease from $257 million for the same quarter a year ago. The company reported software license fees of $131.1 million, down from $161 million a year ago. BEA offered some positive signs, completing approximately 2,500 transactions, adding 500 new customers and generating $55.7 million in cash flow from operations. In addition, BEA had 13 customer deals of more than $1 million.

"These are solid results," says Alfred Chuang, founder, president and CEO of BEA. "The number of large deals is an indication that BEA is becoming very strategic to large companies' IT infrastructure."

Net income, however, was down more than 80 percent from a year ago, falling to $3.9 million, or 1 cent a share, from $20.6 million a year ago. Excluding one-time charges and acquisition related expenses, BEA reported pro forma operating income of $35.1 million and pro forma operating margin of 15.6 percent. BEA reported pro forma net income of $25.3 million and pro forma diluted net income per share of 6 cents for the first quarter.

BEA also lowered its outlook for the year. Chuang says he expects revenue to change only "plus or minus 5 percent" from fiscal 2002's performance of $976 million. Previously, the company had forecast revenue for 2003 to be between $975 million to $1.25 billion. Company officials also expect second-quarter earnings to be flat or up slightly. The Wall Street consensus was second-quarter earnings of 7 cents a share on revenue of $235.2 million.

On top of a tough economic climate, BEA has also been faced with stiff competition in the Internet application server market, where BEA's WebLogic had led with more than one-third of the total market. Recently, Giga Information Group reported that BEA and IBM are now tied in the application server market with 34 percent each.

Chuang remained optimistic about the competitive landscape, saying WebLogic is "the most mature, battle-tested application server" in the industry. BEA officials say they have gone head to head against IBM for many customer wins and even made some conversions to WebLogic from IBM's WebSphere. Chuang pointed to a recent deal with Dell, which made WebLogic its application server standard and replaced IBM's WebSphere.

"Our business is healthy," Chuang said. "We're clearly beating the competition."

There are other bright signs for the company, including a first-quarter increase in international sales, which represents 44 percent of BEA's business. BEA says it has emerged as the portal software leader with nearly 600 customers for its WebLogic Portal, and that its WebLogic Integration business has grown 76 percent in the last year. In addition, BEA unveiled earlier this year WebLogic Workshop, a much-needed application development tool for creating J2EE applications. Analysts had identified application development tools as a weak area for BEA.