Vignette Results Reflect Software Struggles

The content-management vendor has countered slumping revenue with cost-cutting and product options that give customers choice.
Less than a week after rivals Documentum Inc. and Interwoven Inc. reported starkly contrasting earnings, content-management vendor Vignette Corp. posted first-quarter earnings Tuesday that aligned much more closely with Interwoven's disappointing showing. Compared with their counterparts at Interwoven, however, Vignette execs maintain a much rosier outlook for their company's near future. Execs said during a conference call with analysts Tuesday that the company's continued losses, sharp drop in revenue, and slide in product licenses are countered by cost-cutting measures that have the company moving steadily toward the break-even level.

CEO Greg Peters said that although IT budgets remain tight in regard to software purchases, the company is encouraged by healthy adoption of recent product offerings. Key among those is a lower-priced "standard" version of its V6 content suite that accounted for about one-third of the 31 new customers Vignette says it signed during the recently concluded quarter. Vignette also has seen strong interest in its Jumpstart package, which features consulting and education services for customers looking to deploy content management for the first time.

Peters also said that 400 customers have licensed or upgraded to V6, which was released in September, and that the deal pipeline is looking good. "It's definitely healthier than Q1 as we head into Q2," he said. Peters said he expects V6 to be the company's primary revenue driver through 2002, with the next major product revision, dubbed V7, due by the end of the year. Still, analysts' questions during the conference call indicated they're not convinced that the company's financial standing is on the mend. In a moment that shone a light on Vignette's--and the software industry's--struggles, the most enthusiastic take came when one analyst congratulated Peters on "at least meeting" expectations.

For the quarter ended March 31, Vignette posted a loss of $37.9 million on revenue of $46.4 million, down from a loss of $229.6 million on revenue of $90.1 million a year earlier. The previous year's loss included $126.9 million in amortization and $49.1 million in restructuring charges. Vignette also reduced sales and marketing expenses to $29 million, from $52.7 million last year, while R&D spending was cut to $13.9 million, from $19 million. Company execs offered no guidance for 2003, but said they expect revenue to remain relatively flat while the projected break-even level is about $55 million.

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Brian T. Horowitz, Contributing Reporter
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