FileNet Shares Plunge 57% on Report of Loss

FileNet Corp. shares lost more than half their value Thursday after the maker of document management software said it would report an unexpected third-quarter loss.

FileNet shares slumped 57%, the second biggest percentage loss Thursday in U.S. markets. The stock tumbled $5.31 a share to $9.39 as 12.8 million shares changed hands, more than 25 times the average daily volume over the last three months.

Earlier in the session, the stock slumped to $3.69, its lowest level since January 1991.

The Costa Mesa-based company said after the market closed Wednesday that it would report a loss of about $5.8 million, or 18 cents per share, for the third quarter. According to a First Call survey, analysts were anticipating that the company would post a profit of 14 cents a share.

FileNet said late Wednesday that some orders in its pipeline didn’t materialize as expected, in part because of the global economic crisis. The company also said it has doubled its sales force in the past year and is training new employees, contributing to the shortfall.

A combination of “poor execution and new salespeople, Y2K and the economy” is hurting the company, said David Hilal, an analyst at Friedman, Billings, Ramsey who rates FileNet “accumulate.” Y2K refers to the Year 2000 computer glitch. “Investors don’t like to get burned,” he added.

FileNet’s software helps companies manage documents electronically and manage information to boost productivity.

The company said it expects revenue to be about $71.2 million in the third quarter. The company had net income of $1.9 million, or 6 cents a share, on revenue of $65 million a year earlier. It will report third-quarter results Thursday.