FileNet Expects Earnings to Be Below Projections

FileNet Corp. said it expects second-quarter earnings to fall well below analysts’ projections because of disruptions stemming from recent acquisitions and a number of missed sales.

The Costa Mesa-based company, which makes software used to manage electronically stored documents, said it expects second-quarter earnings of about $2.4 million, or 15 cents per share, short of analysts’ projections of a $6.4-million profit, or 39 cents per share.

Second-quarter sales are expected to total $65 million, better than the $56.1 million in sales reported in the comparable period a year earlier, but still short of projections.

Although Tuesday’s news was issued after the stock markets closed, FileNet stock fluctuated sharply before finishing the day at $33 per share, down $2 in active trading on the Nasdaq market.

FileNet said the disappointing results stem partly from disruptions caused by absorbing the sales departments of Saros Corp. and Watermark, two software companies acquired by FileNet over the past year.

“Reassigning personnel, getting people trained and quotas handed out is a fairly complex process that diverted both management and sales personnel’s time during the quarter,” said Mark St. Clare, chief financial officer at FileNet.

He added that a number of sales orders were either delayed or canceled. “Analysts were expecting a certain level of sales,” he said. “There were more than adequate deals to reach that level, but when some don’t close, you wind up short.”

St. Clare said there is unlikely to be a corresponding sales rebound in the upcoming quarter.

For the six months ended June 30, FileNet expects to report net income of $6.6 million, before one-time charges, on sales of $132 million. In the comparable period a year earlier, FileNet reported net income of $4.5 million on sales of $105 million.

FileNet said it expects to report final second-quarter results on July 23.