BEA blames sales reorg, Americas for profit warning
Published:02-May-2007
By BR staff writer
Infrastructure software vendor BEA Systems has blamed a salesforce reorganization and a difficult selling environment in the Americas for preliminary results well below analyst expectations.
For its fiscal quarter ended April 30, the company expects to report revenues between $342m and $347m, with license revenue expected to be in the range of $111m to $116m. Analysts were looking for $357.8m revenue, while BEA had said it expected license revenue in the region of $132m.
"This quarter we saw a difficult selling environment, especially in the Americas, and several large deals slipped out of the quarter," said BEA CEO and chairman Alfred Chuang. "During the quarter, BEA made several changes in our sales organization, especially in aligning our sales force around new products."
"We believe these changes are positive for BEA in the long run, but implementing these changes caused some disruption in the short run," said Chuang. "Several geographies outside the US performed well."
On a more positive note, Chuang said its AquaLogic SOA management and governance line had another strong quarter, especially the AquaLogic business process management product. "We are very well positioned to continue our leadership position in the SOA market," said Chuang.
BEA also said that when it does report final numbers these are expected to be abbreviated due to an ongoing internal stock option grant review. BEA is scheduled to release its first quarter results on May 16. By the time of writing BEA's shares had fallen over 8% on Nasdaq.
Our View
This news will unfortunately for BEA fan the flames of recent concerns that it is rapidly losing out to Oracle, whose CEO Larry Ellison claimed recently that his firm has now overtaken BEA's middleware business with its own Oracle Fusion Middleware line. Ellison said, "We are growing...more than ten times faster than BEA."
However the number of occasions on which Oracle is actually displacing BEA from existing accounts or beating BEA in competitive tender situations - as opposed to selling Fusion Middleware to vast numbers of existing Oracle customers, which it unquestionably is - is a matter of considerable debate.
The last time that we caught up with Alfred Chuang in person, he was quick to dismiss Oracle's Fusion Middleware technology, and broader Project Fusion strategy to combine its acquired enterprise applications, thus: "Don't talk to me about Oracle Fusion or 'confusion' as I call it. I have a simple mind. They have like five CRMs Now they have this magical piece of middleware that they built in months - how is that possible?"
But the fact remains that Oracle is perhaps the last company another vendor would choose to go head-to-head with, and that Oracle has made middleware one of the key fronts on which it intends to do serious battle.
In any event, it's also clear that Oracle is not the only thorn in BEA's side. SAP's NetWeaver platform, HP flushed from its recent Mercury Interactive buy, Tibco, IBM and even salesforce.com's recent forays into integration with its AppExchange strategy should not be ignored.
With the SOA infrastructure software marketplace still undergoing considerable maturation, it is not only platform players that BEA must contend with. It must also continue to fight off players in the SOA space like Progress after its recent Actional buy, Cape Clear, AmberPoint, SOA Software, Iona, Infravio and numerous generic open source projects and commercial ISVs. There is a high probability that webMethods could see a renaissance too once its acquisition by Software AG closes in the second quarter.
But ultimately none of this should overshadow the fact that BEA has proven itself a more than capable competitor to these firms and more in the past - it laughed in the face of the iPlanet Application Server fiasco and put paid to HP's application server designs when HP bought Bluestone.
Sometimes short-term growth must be sacrificed at the expense of building a longer-term future, and if Chuang is to be believed, the recent sales restructuring puts it in a position to make the most of its AquaLogic portfolio. None of which, sadly, will make an iota of difference to the financial analysts or investors that demand strict adherence to largely notional sales targets each and every quarter.
One final point: Global Equities Research analyst Trip Chowdhry released a note to clients early yesterday calling HP a likely suitor for BEA. Perhaps he's not met Chuang as recently as we have, because nothing could have been further from his mind than selling up when we last caught up with him. Besides, HP would be daft to buy BEA when it is only just starting to digest Mercury Interactive, and it made such a hash of its Bluestone buy (a BEA competitor) last time round.
