Cognos profit bounces back; offers upbeat outlook

OTTAWA, June 20 (Reuters) - Buoyed by strong demand for its new products, Cognos Inc. posted a first-quarter profit on Thursday that beat expectations by 2 cents a share and the world's largest supplier of business intelligence software forecast stronger sales and profits in the quarter and year ahead.

The first quarter results -- net earnings of $9.9 million, or 11 cents a share -- beat guidance repeated on May 28 for a profit between 8 cents and 9 cents a share on revenues of $117 million to $118 million.

"The market pretty much anticipated they would exceed those results," said Jeffrey Fan, an analyst at UBS Warburg. "The quarter looked pretty good."

The average estimate of 21 brokers surveyed by Thomson/First Call was for a profit of 9 cents a share.

Cognos, whose software is used to access, analyze and report on corporate data, last year reported a net loss of $11.1 million, or 13 cents a share, in the quarter, which included a $12.8 million restructuring charge.

First quarter sales came in at $120.1 million, compared with the Thomson/First Call average estimate of $118.6 million. Revenues in the same quarter last year were $108 million.

"We're certainly pleased with it in the tough economic selling market," chief executive Ron Zambonini told Reuters. "The biggest difference this quarter, I think, is we have Series 7, our new product release, out and up and running."

Series 7 uses components from several Cognos products to gather the data in a corporate computer system, sort it, and make it available at one location on a company's intranet.

Zambonini said that Cognos won a Starbucks deal, worth more than $1 million, against rival Business Objects SA because of its Series 7 technology.

Ottawa-based Cognos said it expects second-quarter earnings of about 14 cents a share and sales of about $128 million. Analysts polled by research firm Thomson/First Call expected earnings of 14 cents and revenues of $129.2 million.

It forecasts fiscal 2003 earnings of between 68 cents and 70 cents a share on sales of between $540 million and $550 million. Analysts polled by Thomson/First Call expected earnings of 71 cents a share and revenues of $550.9 million.

The market will expect Cognos, well known for its conservative estimates, to better those forecasts, said BMO Nesbitt Burns analyst David Wright.

"It's a tough environment, so it's nice to see them making forecasts and seeing them through," he said.

Large sales
Cognos said it closed four deals worth more than $1 million, matching a record high for the first quarter.

The company's business intelligence license revenue came in at $48 million for the quarter, a 16 percent increase over the same period last year. Total business intelligence revenues were $111.6 million, an increase of 13 percent over last year.

Strong demand in North America, where license revenues grew 42 percent, helped offset a 15 percent decline in Europe and 14 percent drop in the Asia-Pacific region.

Cognos said on Thursday that it will sell 4.5 million common shares owned by company founder and former chief executive Michael Potter, with an overallotment option of 675,000 shares. Cognos won't receive any funds from the sale, which it said is intended to help Potter diversify his portfolio.

The company also announced that its senior vice-president of strategy, Alan Rottenberg, will be leaving, and it named John Rando to its board of directors.

Shares in Cognos fell more than 6 percent on Thursday to end the session at C$30.11 on the Toronto Stock Exchange and at $19.75 on Nasdaq. The stock is off about 35 percent from its year high and 70 percent above its 52-week low.

($1 = $1.53 Canadian)