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Informatica caught flat-footed by revenue shortfall

Blames stingy Europeans, skittish Americans

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June was not a particularly fun month for data-integration software specialist Informatica, which has just put out preliminary financial figures for its second quarter ended last week.

Those numbers show that companies in the EMEA slammed on the spending brakes, and that American companies with a presence in Europe or which were directly affected by the European economy also got jumpy and started kicking sales proposals from Informatica upstairs for higher approval.

That's the story from Sohaib Abbasi, chairman and CEO at Informatica, who hosted a call with Wall Street analysts to tell them that the company was not going to make its earlier quarterly projections, which sent Informatica's shares a-tumbling.

It is probably not a coincidence that Informatica rejigged its management team in Europe back in April, at the beginning of the quarter. This was too much change for the company to digest, apparently.

"I am disappointed that we fell short of our own expectations," Abbasi said on the call, although exactly what expectations Informatica had were not precisely laid out three months ago. The company had said that it expected to boost sales to between $880m and $910m for the full 2012 year, and that it would see flat to slightly up software license growth and more services sales in the second quarter.

The average of analysts polled by Thomson Reuters I/B/E/S pegged Q2 at $217.2m with earnings per share of 37 cents, while those polled by Bloomberg said it would be more like $217.4m in revenues and 36 cents per share in earnings.

So when Informatica put out a statement saying revenues would be somewhere between $188m and $190m and earnings per share would be in the range of 16 cents to 17 cents, Wall Street reacted predictably, promptly sending Informatica's shares tumbling 35 per cent when they opened for trading on the NASDAQ Friday morning.

As El Reg goes to press, Informatica's shares are still off 29 per cent at just under $31 a pop, leaving the company with a market capitalization of $4.7bn. That is probably still much too expensive for all those software enviers – such as HP and Dell – to afford.

Abbasi said that the sales team in Europe didn't adapt quickly enough to the "increasingly cautionary tone" of customers in Europe as June progressed, which is why it has been caught up short. Going forward, Informatica is building in the assumption of needing more approvals to close deals and taking more time to do so – but even still, the company thinks it can still grow revenues in the second half of the year.

Informatica is projecting software license sales in the range of $70m to $72m for the second quarter, down around 11 per cent sequentially from the first quarter, with services and support revenues of between $117m and $119m, a little bit higher than the $115.9m it posted in the quarter ended in March of this year.

To help Wall Street with its palpitations, Informatica's board kicked in $100m in stock repurchasing authorizations to match the $47m in outstanding authorizations it already has. The company spent $30m buying back its own shares in the second quarter, said Informatica CFO Earl Fry on the call. Informatica ended the March quarter with $566m in cash and short-term investments and no debts, so it can ride this out from a financial perspective.

The only problem is that Informatica's miss just made a whole new round of people nervous about IT spending.

Informatica will report its full financial results for the second quarter on July 26. ®

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