In keeping with its July 6 warning to investors, Internet software maker Visual Networks Inc. reported second-quarter pro forma net income of $188,000, or 1 cent per share, yesterday.
The earnings, based on revenue of $32.4 million, fell about 83 percent short of the 6 cents per share expected by a consensus of analysts previously polled by First Call/Thomson Financial.
The Rockville company, which makes Internet management software, blamed the earnings slump on difficulties associated with its merger with New York-based Avesta Technologies, an e-business software company that it bought this year in a deal valued at $415 million. The company has downgraded its earnings projections for the rest of the year and into 2001.
"There is no doubt that the next several quarters will be challenging for Visual Networks as we work through the near-term execution issues associated with the recent acquisition of Avesta Technologies," said Scott Stouffer, Visual Networks president and chief executive officer.
Visual Networks warned Wall Street July 6 that earnings would fall well short of expectations, prompting five brokerages that cover the company to downgrade its stock. Investors punished the company on the news, sending its stock plunging 54 percent to close at $12.
The pessimism has softened some since then, with one analyst, Richard J. Sherman of Janney Montgomery Scott, upgrading the stock slightly from a "hold" to "accumulate." The stock closed at $12.50 per share yesterday, down 6.25 cents and well below the 52-week high of $87.50.
The company said this month that it expects to report third-quarter revenue of $30 million and a loss of 3 cents per share. Analysts had previously projected third-quarter earnings of 8 cents per share.
Law firm Spector, Roseman & Kodroff said yesterday that a class action suit has been initiated against Visual Networks, claiming the company issued false and misleading statements about its growth prospects. Visual Networks denies the claims and said that it will "vigorously" defend itself.