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Aspen Technology Posts First-Quarter Loss but Beats Estimates

Written By: Steve McVey
Published On: October 26 1999

Aspen Technology Posts First-Quarter Loss but Beats Estimates
S. McVey - October 26th, 1999

Event Summary

Aspen Technology recently announced a shortfall in earnings for the period ended September 30, 1999, although it exceeded analysts' expectations. Total revenues for the company were $53 million, of which $21.5 million were derived from software licenses and the remainder from services and support. Net loss for the quarter was $4.1 million, or $0.11 per share. CEO Larry Evans attributes the loss to industry pressures and consolidation within its target markets.

Market Impact

As predicted in TEC's note, "Aspentech: Searching for Definition in 2000", Aspen's restructuring efforts continue to weigh on its sales organization, resulting in poor revenue growth in 1Q00. Revenues were slightly better than originally expected, however, and the company's SCM (supply chain management) business is owed much of the credit. In addition, operating expenses dropped sharply due to restructuring efforts that involved cutting its staff by about 12 percent, closing offices, and rationalizing non-core products. The first quarter following a fiscal year-end is traditionally the weakest quarter for Aspen. Provided that it achieves further customer support for its supply chain management applications and that it can effectively manage its leaner organization, Aspen should be able to avoid serious losses over the next several quarters.

User Recommendations

Users in the process industries should capitalize on the vendor's eagerness to win new contracts by asking for price breaks on license fees and/or maintenance. Aspen MIMI should still be a strong contender for companies in chemicals, petroleum, pharmaceuticals, or semiconductor seeking to augment an existing DCS (Distributed Control System) or SCADA (Supervisory Control and Data Acquisition) system with SCM, but who have not yet implemented ERP. For companies in complex manufacturing industries (high tech, semiconductor), MIMI may be a reasonable fit if complex business processes require custom modeling.

 
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