FileNet Earnings Better Than Expected
FileNet Corp., demonstrating that the steady improvement shown in the last three quarters was no fluke, registered a blowout with first-quarter earnings and record revenue that trampled Wall Street’s expectations.
The Costa Mesa electronic record-storage company reported net income of $2.5 million, or 15 cents a share, well above Wall Street’s consensus estimate of 9 cents a share, as tracked by First Call Corp.
For last year’s first quarter, FileNet lost $9.4 million, or 63 cents a share.
Quarterly revenue rose 55% to $73.6 million for the first three months from $47.6 million.
“We’re in the straightaway,” said Chairman Ted Smith, declaring that the turnaround engineered over the last 12 months is complete.
Analysts give credit to Lee Roberts, the former head of International Business Machines Corp.'s global networking sales, who came to FileNet as president and chief operating officer last May.
Before Roberts’ arrival, FileNet had struggled with the integration of several acquisitions.
“When Lee came in, he had a very solid understanding of where the problems were at the firm, and he’s going after them,” said Paul J. Dravis, an industry analyst at NationsBanc Montgomery Securities Inc.
On Thursday, FileNet’s board rewarded Roberts by naming him chief executive. Roberts, however, credited Smith, whom he replaced as chief executive.
Smith will remain active in corporate strategy and customer relationships.
“The key thing is that Ted had a vision when he created the company,” Roberts said.
“We had a vision when we made the acquisitions that we did, and we’re now starting to demonstrate that the vision was right. I think we’re very well-positioned in an explosive market for strong growth.”
The first quarter was buoyed by the success of FileNet’s Panagon document-management software, introduced in January.
Panagon, a product of the earlier mergers, sits at the crossroads of several software-industry trends.
It is Web enabled, relatively inexpensive and provides desktop access to the ever-growing body of unstructured documents residing in corporate systems.
It is also easier to write applications for Panagon than FileNet’s previous document-management products, giving it a tremendous amount of versatility.
Under Roberts, FileNet also has strengthened its sales force and its channel-partner sales. Traditional document-management and work-flow products generated strong revenue in the first quarter, he said.
In the quarter, FileNet added 118 new customers; it now has more than 3,600 customers in all. The figure is important, Roberts said, because customers tend to buy single-use applications at first, then widen the products’ use with repeat purchases.
The company’s stock hasn’t yet returned to the $67-a-share high point it reached in early 1996, before all the trouble began.
But it closed Thursday at $48 a share and rose to $48.75 in after-hours trading. That’s a long way from its low of $9.50 set a year ago.