WebMethods Beats Street For Quarter

CEO Optimistic About Financial Climate

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WebMethods beat the street for its third quarter of fiscal 2002, reporting $49.1 million in revenue, an 18 percent increase over consensus analyst estimates of $41.6 million.

webMethods reported a loss of 5 cents per share, down from the 5 cents per share it earned for the same period last year but ahead of a First Call analysts predicted 17 cents per share loss for its third quarter ended Dec. 31.

In its earnings statement WebMethods, based here, also reported that it expected to close its year on March 31 with revenue of between $210 million and $224 million and earnings per share of between 10 cents and 14 cents.

In a conference call, CEO Philip Merrick attributed webMethods' success in the quarter to "greater than expected license revenues and good expense controls." WebMethods license revenues for Q3 increased 40 percent quarter to quarter, according to the company.

Merrick also attributed webMethods' better than predicted results to the company's continued collaboration with partners, particularly systems integrators.

"Partnerships with application vendors and systems integrators were big revenue drivers," said Merrick, adding that webMethods derives 50 percent of its revenue through its partners.

He cited deals with Accenture and EDS as examples of successful partnerships in Q3, and said webMethods generally is seeing "an increase in deal sizes and in number of deals brought to us" by partners.

Merrick expressed optimism about the dismal financial climate that caused his company and other tech companies to take huge hits in 2001. He said he does not anticipate webMethods will lay off any more employees, and believes the vendor can return to profitability without cutting staff numbers. webMethods laid off 15 percent of its work force last year.

"Although we are not out of the woods yet, the macro environment is more positive," said Merrick. "[WebMethods is only a few million dollars away from break-even and [will be able to do this without further head count reductions."

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