Gentia Software has issued a profits warning for its fourth quarter, blaming a change in sales strategy for the bad news, which saw its shares temporarily suspended on Nasdaq.
The online analytical processing (Olap) software supplier, formerly known as Planning Sciences, said it expected fourth quarter revenues of $5-$5.5 million compared with $8.2 million in the same period last year, on net losses of between $2.5 and $3 million, compared with profits of $944,000 last time.
The forecast is way down on analysts? expectations. Gentia had previously anticipated sales of between $7-$8 million, with net income between breakeven point and a loss of $500,000 for the quarter.
Sources said that new software sales had halved year on year because the company kept chopping and changing its sales and marketing strategy.
?There?s been a big outflow of people. Gentia may say it?s made six new hires, but they?re unlikely to replace the ones that are gone. It needs to be taken over. Its strategy?s not worked over the past six months and the only thing that seems to be keeping up its share price, is the hope that it may be taken over,? one source exclaimed.
But George Schenkle, Gentia?s chief financial officer, said the company, like other Olap vendors, had experienced high turnover of sales staff because the economic situation in the US and UK was good, which made it an employees' market.
But he denied that the company ?s stock stopped trading on Monday at $4 3/8 because the market was so shocked by its profits warning.
Rumours had apparently been flying on Friday that Gentia was to announce it had been taken over and sources said its shares, currently trading at $3.25 were still being buoyed by takeover hopes.
Schenkle said: ?Our shares were suspended when we announced our profits warning, which is just standard procedure. Someone has been buying our shares and accumulating them. On Friday, Nasdaq said it was retail buying, that is individuals, but on Monday, it was wholesale buying. But, we aren?t in talks with anyone about a takeover.?
He added that the firm?s top and bottom line had been hit this quarter by its move to an applications-led sales approach from a technical sell.
?When we miss our numbers, we lose everything to margins,? he explained. ?We need $7.5 million per quarter to breakeven, and if we drop $2.5 million, we?re in a hole.?
But the transition was necessary, he said, because Gentia intended to introduce its new balanced scorecard performance management software next month, which would be a boardroom rather than an IT level sale. The offering is based on its Gentia decision support software and will be positioned as the firm?s new flagship product.
The transition would also anticipate Microsoft?s introduction of its Plato mass market Olap offering to the market, Schenkle said. Its balanced scorecard software would allow it to differentiate itself, and unlike the other Olap engine vendors, prevent it from competing head on against Microsoft.
Gentia expects to announce its year end results on 29 January.
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