$4-Million Loss Sends Platinum Software Shares on a 37.5% Slide

Platinum Software Corp. shares plunged 37.5% Wednesday after the maker of business accounting software said it expects to report a quarterly loss of about $4 million and is planning employee layoffs.

The Irvine-based company said an “abrupt decline” in sales of its Enterprise line of software, which is purchased by large corporations with heavy accounting needs, was largely to blame for the anticipated loss. The disappointing results are just the latest in a series of problems for the company, which has struggled to regain stability after its bookkeeping practices got it into legal trouble last year. In the latest fallout from that scandal, five former Platinum officials and the company’s auditor said Wednesday they have agreed to pay $15 million to settle a shareholder lawsuit.

Platinum stock closed at $5 per share Wednesday, down from $8 per share a day earlier, in heavy trading on the Nasdaq market. Wall Street frowned on the company’s statement that it expects revenue of about $13 million for the quarter that ended Sept. 30, falling short of analysts’ expectations that sales would top $16 million.

Platinum executives were not available for comment, and a company spokeswoman declined to explain in detail the revenue shortfall. “We’re still evaluating that,” said spokeswoman Geri Schanz.

In a prepared statement, Platinum said it plans “personnel reductions” as part of a series of cost-cutting measures that will be unveiled when the company announces its quarterly financial results on Oct. 23. The company reported a loss of $5.7 million on sales of $56.2 million for the fiscal year that ended June 30.

Platinum would not say how many of its 550 employees in Irvine and at other locations around the world might lose their jobs.

Industry analysts said Platinum is still struggling to bounce back from the bookkeeping fiasco that led to the company’s admission that it had overstated revenue by $18.2 million in 1993 and 1994.

Last year, Platinum agreed to pay $17 million to shareholders who filed a lawsuit in January, 1994, accusing the company, its outside auditor and the former officials of misleading investors. But the troubles surrounding the case have continued to haunt Platinum, as some customers have hesitated to do business with a company in financial turmoil, analysts said.

“People don’t want to buy products from a company that might not be around,” said Frank MichnoffQ, an analyst at Donaldson, Lufkin & Jenrette in New York City.

The company has also been hampered by strategic blunders made by a team of executives that was ousted last year after the bookkeeping problems surfaced, analysts said.

Three years ago, Platinum promised to deliver an accounting program linked to the popular Microsoft Windows operating system. That software had the makings of a best-selling product, but executives at the time concentrated instead on developing an accounting program for manufacturing companies, said Robert Kugel, an analyst at the Seidler Cos. in Los Angeles.

As a result, the release of the Windows-based software was delayed until just recently, Kugel said, and the program for manufacturing companies was never released at all.

But Kugel and others expressed support for Platinum’s current leadership, headed by chief executive Carmelo J. Santoro. “The current management team essentially took a company that was near death and kept it alive,” Kugel said. “It’s a credit to this team that they’re planning to act quickly and decisively.”

Though Platinum ended its liability in the shareholder suit last year, the company’s former executives and auditor, Arthur Andersen & Co., remained defendants until this week. They admitted no wrongdoing, but agreed to pay $15 million to investors who had purchased Platinum shares from Oct. 22, 1992, to April 15, 1994.

“It’s one of these cases where there’s a one in 10 chance of a $100-million judgment, so you settle if the price is right,” said Michael Perlis, a Los Angeles attorney representing one of the defendants, Kevin Riegelsberger, a Platinum founder and former director. Riegelsberger, who remains a vice president at the company, was not available for comment.