Micromuse Sales Up Amid Reporting Probe

Although the results were preliminary, company officials said they expect earnings for the quarter to be $1.8 million, or about 2 cents per share.

"We are more excited than ever about the strength of our business," said Lloyd Carney, Micromuse chairman and CEO. "Our strong results in Q1 show that we continue to be recognized for our technical leadership." Micromuse sells its popular Netcool product suite through an extensive channel network.

The first-quarter 2004 results rose slightly compared with sales in fourth-quarter 2003, when Micromuse posted revenue of $33.3 million. The positive first-quarter 2004 numbers were surprising, given the questions surrounding the San Francisco-based company's restated earnings for fiscal years 2000 to 2003.

In a conference call with analysts last month, Micromuse CFO Mike Luetkemeyer said the company had identified some sketchy accounting practices. He described them as "a small number of discrete and seemingly unrelated accounting entries."

Prompted by questions about past accounting practices, Micromuse began examining its finances in September. As a result of that investigation, the company announced on Dec. 30 that it would postpone filing its 10-K form for the 2003 fiscal year. Luetkemeyer said at the time that the company would incur about $2 million in expenses relating to the inquiry.

Micromuse hadn't filed the 2003 10-K as of Tuesday. But already, Carney and other officials were looking toward the company's fiscal second quarter, which ends March 31. Carney said he expected second-quarter revenue to be $38 million to $39 million and earnings to remain near 2 cents per share.