Hoping to halt a free-fall in the price of its stock, Wonderware Corp. executives issued a news release Friday designed to shore up the confidence of investors who appear to have been shaken by the departure of founder and longtime chief executive Dennis R. Morin.
The price of the software company's stock has slumped nearly 48% since Morin resigned Nov. 29 as part of a long-planned transition. His handpicked successor, Roy H. Slavin, was named chief executive. The company's stock, which was trading at $30.375 when Morin departed, closed Friday at $15.875 in Nasdaq trading.
Investors also appeared to be reacting to Slavin's comments Wednesday indicating that Wonderware might not be able to match its track record of posting earnings increases of 20% per year.
The company, anticipating increased competition, plans to boost spending on sales, marketing and product development, which will eat into earnings growth, Slavin said at a technology conference in San Francisco.
"We advised that operational expenses could increase to a level that could change the historical earnings model of the company," Slavin said in the news release issued Friday. "Net income . . . typically has been around the 20% level, and we confirmed reports that this could decrease to the 13% or 17% range."
In a sign that Wall Street reacted more strongly than Wonderware officials anticipated, Slavin made a number of comments addressing what was termed a "precipitous decline in the company's share price."
Slavin emphasized that the executive-level transition "had been planned many months ago and was formally launched last summer when I joined the company." He also called his comments at the technology conference "conservative in nature."
"The fundamentals of our business have not changed and our balance sheet is strong," he said. "We feel the successful implementation of this plan in 1996 should return the company to its original net income model sometime in 1997."
Some analysts said investors are overreacting.
"The general perception among investors is that when there is a transition, there's always some risk," said Doug van Dorsten, an analyst at Hambrecht & Quist in San Francisco. "But we think the fundamentals remain pretty good. We have a buy recommendation on the stock."
Wonderware, which makes software used in factory automation, has been one of the nation's fastest-growing software companies in recent years. It had sales of $35.7 million in 1994.