Conferencing Boom Appears To Have Leveled Off

The war in Iraq apparently didn't give Web-conferencing vendors the boost they'd anticipated. Market leader WebEx Communications Inc. said Thursday that revenue grew only 4% from the fourth quarter of 2002, while its smaller competitor, Latitude Communications Inc., saw revenue drop about 8% from the previous quarter.

In a conference call with analysts, WebEx executives cited lower-than-expected event revenue, first-quarter bookings, and pay-per-use revenue for a quarter in which revenue fell $1.7 million short of previous guidance. CEO Subrah Iyar said that half of WebEx's revenue is coming from its collaboration services offerings and that the company is seeing more demand for bundling data conferencing with rich media applications such as voice and video.

Further evidence of that trend came from Latitude, which said Thursday that it would acquire Wanadu Inc., a maker of software for creating, managing, and delivering Flash-based content. It plans to use the technology to further integrate voice, video, instant messaging, and Web applications with its conferencing products.

WebEx's Iyar also said that the company is working with telecom providers to drive mass adoption of its online meeting tools before Microsoft releases its own online conferencing offering based on its acquisition of WebEx rival PlaceWare Inc. earlier this year. Microsoft has not detailed plans for how it will package PlaceWare within its line of collaboration products, but analysts expect it to be 12 to 18 months before it does so.

For its first quarter ended March 31, WebEx reported a profit of $6.3 million on revenue of $41.8 million, compared with a profit of $1.1 million on revenue of $29.6 million a year earlier. Fourth-quarter 2002 revenue was $40.3 million. Also for its first quarter ending March 31, Latitude reported a profit of $36,000 on revenue of $9.4 million, compared with a loss of $1.5 million on revenue of $9.5 million a year earlier. Its fourth-quarter 2002 revenue was $10.2 million.

WebEx also said CFO Craig Klosterman will step down later this year, citing the maturation of WebEx and his desire to continue taking positions with startups as reasons for his departure. Klosterman will remain with the company for six to nine months to help groom his replacement.