Autonomy crashes on profit alert
SOFTWARE house Autonomy has stunned investors, saying second-quarter earnings would be half what had been expected after sales were hit by an 'unexpected return of weakness' in Europe. Shares in the company crashed 76p, or 37%, to a low of 129p.
The shares, once the darling of a technology-loving stock market, peaked at 4100p shortly after transferring from Easdaq to a London Stock Exchange listing in November 2000. The Cambridge company, then valued at more than £4bn, was a member of the FTSE 100 index. Today Autonomy is capitalised at only £170m.
Founder and chief executive Mike Lynch, Britain's first internet billionaire, now holds shares in the group worth slightly more than £30m. He has collected about £80m through share sales along the way.
Autonomy said revenues would be between $12m and $13m (£7.75m and £8.40m) for the three months to the end of June, down from $14.1m in the first quarter and well below analysts' forecasts of $14.9m. It said earnings were likely to be one cent a share, down from three cents in the first quarter. The City had been expecting two cents.
Lynch said he was disappointed: 'We will not now show the modest sequential growth hoped for at the beginning of the quarter. In contrast, revenue growth in our key US market has continued. We remain positive about our medium-term prospects, are encouraged by the recovery in the US, and continue to monitor the situation in Europe.'
Co-founder and chief technology officer Richard Gaunt said: 'Europe has done much worse than we expected after some recovery in the previous quarter. We had some very significant contracts sitting on the table waiting to be signed and then customers just said they couldn't spend money at the moment and walked away. There were five or six significant contracts where that happened.'
Investment bank Goldman Sachs warned that Autonomy was working at a 'bare bones' level after customers cancelled orders at the last minute. It reckoned that software licence sales had fallen by a fifth year-on-year, with only 21 deals closed in the latest quarter.
Advising its clients to avoid the shares, Goldman said that if sales fell further Autonomy risked producing negative cash flows. It cut its revenue forecasts for 2002 by 17% to $49.9m and those for 2003 by 29% to $56.6m.
Lynch said: 'The company remains focused on exploiting the underlying strength of our business, underpinned by profitability, our cash balance of more than $140m and the return on investment-based demand for our products.'
