Magazine article American Banker

Risk Software Firm: Y2K Siphoned off Business

Magazine article American Banker

Risk Software Firm: Y2K Siphoned off Business

Article excerpt

The year-2000 problem claimed another victim in the bank technology sector last week when HNC Software Inc. warned investors that first-quarter earnings would not meet expectations.

The San Diego-based company blamed banks' preoccupation with the year-2000 conversion for crimping sales of its neural networking software for predicting customer behavior.

HNC "may have underestimated" the effect year-2000 considerations would have on its margins, said Robert L. North, president and chief executive. "We are finding cases where customers are more hesitant to make major buying decisions."

Some other bank technology providers have also said that focus on the millennium bug has depressed their earnings. Over the past year, vendors including Checkfree Holdings Corp., Diebold Inc., Jack Henry & Associates, and Phoenix International have cited the problem.

HNC said a preliminary review of the quarter's results suggested it took in $48 million to $50 million of revenue in the period, below analysts' expectations of $52.4 million.

HNC was expected to earn 22 cents a share, according to the consensus analyst estimate tracked by First Call. The company guided expectations lower, to between 15 cents and 17 cents. In the year-earlier quarter it earned 18 cents a share on revenues of $35 million.

Company officials said other events contributed to the revenue shortfall. For instance, one undisclosed insurance customer delayed a large contract at the last minute, while another customer was lost due to consolidation in the insurance industry.

HNC's earnings alert last Wednesday caused its stock to fall 43% on Thursday to $15.50 a share. Thursday's trading volume of 10.2 million shares was 22 times the average. That day HNC authorized the repurchase of 10% of its stock, boosting the price somewhat, but the stock closed Friday at $18. …

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