Wave Systems Corp. (fka WAVXQ)

[solas]

OT- see my bolded. -R

http://www.amtddj.inlumen.com/bin/djstory?StoryId=CqS36qaebqLqWmdqYodu


07-08-05 1128ET

Copyright (c) 2005 Dow Jones & Company, Inc.

=DJ Altiris Down; Cuts Guidance, Sees Uncertainty Ahead



By Deborah Finestone
Of DOW JOENS NEWSWIRES

NEW YORK (Dow Jones)--Shares of Altiris Inc. (ATRS) fell 13.5% Friday to a two-year low after the enterprise software company lowered its second-quarter guidance and said a slowdown in large sales and changes with a primary customer would hamper growth for the rest of the year.

"Most concerning of all is management's comments on competitive pressures, pricing pressures, and its lowered outlook for the year," Think Equity analyst Peter Coleman wrote in a research note. "We are pleased to hear that management is lowering its outlook and planning a restructuring to lower its expenses."

Altiris said its performance through its original-equipment-manufacturer partner Hewlett-Packard Co. (HPQ) was below expectations due to several larger transactions that were pushed to future periods.

The company expects H-P to represent about 20% of revenue in the second quarter, for which it will report results in early August, down from 31% in the prior quarter.

"We have a strong installed base, an active pipeline of opportunities through H-P, and do not believe that our relationship with H-P is going away," Chief Executive Greg Butterfield said on a conference call Thursday, according to a transcript provided by Thomson StreetEvents.

Future sales through H-P are also likely to slow due to a change in incentives for H-P's salesforce, he said.

However, sales to Altiris' other primary customer, Dell Inc. (DELL) are expected to increase to 28% of revenue from 18% in the first quarter, Butterfield said.

Butterfield said the company is planning for 10% to 15% revenue growth in 2005. On the call, he also noted the infrastructure management market as a whole may see growth slow to 5% to 6% a year, well below other estimates, noted Jefferies analyst Katherine Egbert, who rates the shares at underperform.

Altiris said it closed a record number of transactions of more than $100,000 in size, but the average size of such transactions declined dramatically, as customers scrutinized major infrastructure software purchases more carefully.

Nonetheless, Butterfield said the company remains well-positioned long-term, as customers continue to want its software to reduce the cost and complexity of systems management.

"We expect a more modest contribution from H-P during the second half of 2005, and we anticipate increased competition from other systems management vendors," he said. "Therefore, we are more cautious about our outlook for the remainder of the year.

"We are performing a detailed review of our business operations and intend to take quick and decisive action to more closely align our operating model and go-to-market strategies with near-term revenue opportunities," he said. On the call, he declined to specify if it would cut its staff or where else the company may cut expenses.

"Our main concern is Altiris' ability to grow market share in a market dominated by the major platform vendors," said Coleman, who rates the shares at accumulate. Altiris' competitors include Microsoft Corp. (MSFT), BMC Software Inc. (BMC), Computer Associates International Inc. (CA) and H-P.

Meanwhile, Altiris' March acquisition of Pedestal Software has also not contributed as expected, Butterfield said.

"The bottom line is the sales cycle is longer-than-expected," he said on the call, declining to detail what sales were. "We still believe in the strategic fit of the Pedestal products."

Excluding special items, the software company projects second-quarter earnings of 6 cents to 7 cents a share, lower than its April projection of roughly 20 cents a share.

The latest projection includes a loss of 1 cent for foreign exchange losses, but excludes stock-based compensation, amortization of intangible assets and other items.

Analysts polled by Thomson First Call, on average, currently expect second-quarter earnings of 19 cents a share.

A year ago, the company earned 20 cents a share, excluding items.

Altiris cut its revenue guidance to a range of $45 million to $46 million from a previous range of $50 million to $53 million. Wall Street expects revenue of $51 million, while the company posted revenue of $40 million a year earlier.

ThinkEquity makes a market in shares of Altiris.

The shares recently traded at $12.85, down $2.00, or 13.5%, on volume of 1.8 million shares, about four times its average daily volume. Shares haven't traded in the $12-range since March 2003.

-By Deborah Finestone; Dow Jones Newswires; 201-938-2205


(END) Dow Jones Newswires

07-08-05 1157ET

Copyright (c) 2005 Dow Jones & Company, Inc.