'Y2K hangover' pounds pair of Northwest stocks

by Bloomberg News

A Seattle company that makes call-processing systems and its Eastside rival saw their market value slashed yesterday after they issued back-to-back warnings about worse-than-expected financial results.

Seattle-based Active Voice's stock plunged $39.813, or 61 percent, to $25.188, while Kirkland-based AVT's stock tumbled $15.703, or 57 percent, to $11.922 - making them the second- and third-worst losers, respectively, in the U.S. market yesterday.

Both stocks had been high-fliers. Active Voice stock soared 281 percent last year; AVT was up 62 percent. Active Voice warned Thursday that it expects a fiscal fourth-quarter loss of 50 to 70 cents a share in the quarter ending March 31. Analysts surveyed by First Call/Thomson Financial expected an average profit of 16 cents. AVT, which makes software for fax and other communications services, followed its rival's lead yesterday morning, saying it expects to report a first-quarter profit from operations of 5 to 9 cents a share, well below the 16-cent average estimate of eight analysts polled by First Call/Thomson Financial.

The two companies warned of a drop in sales because of lingering problems linked to Year 2000 concerns. Companies' computer experts last year were focused on fixing the Y2K glitch: the use of two digits to represent a year, which could have caused computers to misinterpret 2000 as 1900, potentially causing disruptions to their operations.

Active Voice's customers were so busy with Year 2000 issues they didn't put in new orders, said analyst William Benton of William Blair & Co. He expects other, larger companies with Year 2000-related revenue to report similar problems in their sales in the coming weeks.

"Don't think it says as much about the company as it does about the industry," said Benton. "Hopefully, they'll be back to normal by the end of the year."

Sales recovery from the "Y2K hangover" could take four to five months, Chief Executive Frank Costa told analysts in a conference call. Fiscal fourth-quarter sales are expected to fall to $12 million to $13 million, Costa said. Active Voice had $22 million in sales in the fiscal third quarter.

The company projects revenue growth of 15 percent to 20 percent this year, below its forecast of 20 percent to 25 percent. Costa said the company will freeze hiring and find ways to cut costs to improve earnings in the next quarter.

AVT's revenue for the quarter ended March 31 is expected to fall to between $23 million and $26 million from $28.8 million a year earlier.

Before yesterday, shares of AVT had doubled in the past year.

http://www.seattletimes.com/news/business/html98/tele_20000318.html Friday, March 17, 2000, 02:39 p.m. Pacific

Active Voice warns Y2K work will add to loss by Seattle Times business staff and news services

SEATTLE - Active Voice said yesterday continuing Y2K concerns have led to lower than anticipated sales during the fourth quarter and a wider than expected loss.

The Seattle company, which makes computer telephony software, said it will post a loss of about 50 cents to 70 cents a share for the quarter ended March 31. Analysts had estimated the per-share loss at 11 cents to 17 cents. The company projects annual sales of $74.3 million, compared with previous estimates of $83 million.

"We anticipated declining Y2K upgrade and replacement revenue, but not to the extent we have seen in the current quarter," said Chief Executive Officer Frank Costa. Costa also said Y2K replacement work distracted the company's sales people during the quarter.

The earnings warning was released after the stock market closed. On a day of general market euphoria, Active Voice stock closed the day down $4 at $65.

http://www.newsnow.co.uk/cgi/NGoto/1291046?-89

-- Carl Jenkins (Somewherepress@aol.com), March 18, 2000