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Informatica earnings estimates slipping thanks to Eurozone woes

Informatica readjusts Q2 earnings estimates, falling way short of Wall Street expectations.
Written by Rachel King, Contributor on

Tech companies appear to be slashing their quarterly earnings estimates left and right this week. Following the news that Seagate revealed it will probably miss estimates for fourth quarter revenue, Informatica is also on the verge of falling below expectations.

The data integration software provider announced new preliminary expectations for its second quarter, ending June 30.

Informatica is now predicting total revenues for the second quarter to fall between $188 million and $190 million with non-GAAP earnings at 27 to 28 cents per share.

For the second quarter, Wall Street is expecting Informatica to report earnings of 37 cents a share on revenue of $217.15 million. Shares were down by 26 percent after Informatica made the announcement on Thursday.

While Seagate's woes could be partially attributed to troubles for the hard drive industry in general following the floods in Thailand last year, Informatica's problems are being blamed on the most obvious target for financial grief these days: Europe.

Informatica CEO and chairman Sohaib Abbasi explained in prepared remarks:

After 31 consecutive quarters of consistent results, I am disappointed that we fell well short of our own expectations in the second quarter of 2012. Clearly, we did not adapt as rapidly as we should have to the changing macroeconomic environment, especially in Europe. Our singular focus now is to redouble our efforts and operational discipline for growth in the second half of 2012 and beyond.

While analysts seem to concede to Europe being used as an excuse and didn't have high expectations nonetheless, there's still room for surprise apparently.

Barclays analyst Raimo Lenschow wrote in a research memo that Informatica "did not react quickly enough to the weakening macro environment, particularly in Europe."

While we had pointed out that macro is becoming tougher..., we are nonetheless surprised by the magnitude of the miss. The company is changing leadership with the departure of the head of field operations, but still the huge gap vs expectations may really concern investors for Informatica but also the broader space.

Piper Jaffray analyst Mark Murphy concurred that Informatica didn't act fast enough in the face of challenges being presented by the weak economic climate in Europe, but the company also didn't work hard enough "to counteract the effects of customer behavior."

Informatica will report complete results for the second quarter on July 26, 2012.

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