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BEA shares slide

'Evidence of decelerating license growth'

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BEA Systems is out of favor on Wall Street amid growing concern it's losing business to IBM and Oracle and growth is being fluffed out by services.

The company's shares tumbled 17 per cent by early afternoon trading the day after reporting preliminary results that narrowly missed analysts' expectations.

Merrill Lynch cut BEA's share price targets, telling clients the stock is overvalued and that the company's growth is being eclipsed by IBM and Oracle. According to Merrill, "evidence of decelerating license growth mounts".

BEA on Wednesday reported 19 per cent revenue growth to $347.7m for its third quarter - Thompson Financial expected $348.7m. Worse, revenue from sales of new software was beaten by services. Licensing grew 12 per cent to $136.4m compared to services, which increased 24 per cent to $211.3m

The company did not say whether growth is coming from its existing WebLogic business or companies acquired for AquaLogic. Also, BEA has not reported full results because of an internal review into stock option grants.

BEA expects fourth-quarter revenue between $378m and $392m. Analysts are expecting $382.3m.®

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