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Business Objects 3Q Earnings Slip Despite Sales Increase

Higher expenses to develop and sell analytical applications, along with delayed royalties from a reseller, took a toll on the business-intelligence software vendor's earnings.
Shrugging off the effect of the sagging economy, business-intelligence software vendor Business Objects SA reported Thursday that sales increased 15% in its third quarter ended Sept. 30. But increased expenses to develop and sell analytical applications, along with delayed royalties from a reseller, took a toll on earnings.

Revenue for the quarter was $99.2 million, up 15% from $86 million in the same period last year. Net income was $9.3 million, or 15 cents per share, down 8% from $10.2 million last year. The lower profits were the result of what CFO Thomas Weatherford says was a conscious decision to increase spending for research and development, sales, and marketing for Business Objects' analytical applications and extranet software--hotly competitive areas right now.

Weatherford says a reseller of Business Objects' software was late making a $1 million royalty payment and that also hurt the bottom line. Indirect channels account for 55% of the company's license revenue. Business Objects revealed Thursday a reseller deal with i2 Technologies Inc., which is embedding Business Objects' WebIntelligence software into its supply-chain applications.

Business Objects, based in Paris, has reason to be pleased with its 32% revenue growth during the quarter in North America, which accounts for 43% of its sales. The software supplier inked four contracts worth more than $1 million in the quarter and 54 worth between $200,000 and $1 million. For the fourth quarter, the company is predicting that revenue will reach $108 million to $111 million. "We expect the economy to recover, but slowly, over 2002," Weatherford says, estimating growth next year in the range of 10% to 15%.