Verity Inc, the Sunnyvale, California-based search and retrieval company whose software powers a host of OEM offerings, including applications from Lotus Development Corp and Netscape Communication Corp, announced its best quarter on record on Tuesday. But considering the trail of losses the company has streaming out behind it, any quarter which pokes its nose into […]
Verity Inc, the Sunnyvale, California-based search and retrieval company whose software powers a host of OEM offerings, including applications from Lotus Development Corp and Netscape Communication Corp, announced its best quarter on record on Tuesday. But considering the trail of losses the company has streaming out behind it, any quarter which pokes its nose into profit will be jostling for a place in Verity’s record book; just over the page from the running total which reads ‘maximum accumulated net deficit so far = $69m.’ Fourth-quarter net income was a slim $1.0m, up from last year’s fourth-quarter loss of $6.0m, on revenues that rose 18% to $13.1m. For the year through May, the company made losses of $16.5m, a shade lower than the year before, and total revenues for the year also fell by 9% to $39m. Exclude revenues from services however and software product sales declined 18% to $18m in the year. But the shares, which two years ago surged over $50 before crashing down again following successive poor quarters, have more than doubled in the last three months to $11, riding the market’s current preoccupation with internet stocks, and bolstered by inevitable take-over speculation. Verity’s lack of profitability stems partly from its huge software development burden. In its efforts to keep its search engine technology relevant when matched against an ever increasing host of rivals, Verity currently spends around 50% of its license revenues on research and development. This compares with a more normal software industry percentage in the mid teens to mid twenties. There was no mention of any significant new customer or contract wins in the quarter, but CEO Gary Sbona insisted, the final quarter of our 1998 fiscal year represents the third consecutive quarter of improved financial performance for Verity. I am extremely pleased with the company’s performance. No cash flow information was given alongside the results for the year, but cash reserves remained flat at around $18m while the number of days sales outstanding in trade debtors increased from 93 days to 136 days at the year end. The results were announced after the close of markets and the shares closed down 1.6% at $11.31.
