Edify Corp., a leader in Internet banking software and a historically strong financial performer, is working to put a dismal first quarter behind it.
The Santa Clara, Calif.-based company, which also develops client/server software for human resources applications and call centers, is at a critical juncture as banks move increasingly into Internet and home banking.
Edify hit a bump in the road because of a decision late last year to convert its software products to run on the Microsoft Windows NT operating system. There was little problem technically, but the story was different on the sales and marketing side of the organization, said Edify spokesman Jeff Zimmerman.
Salespeople were more familiar with International Business Machines Corp.'s OS/2 operating system, but customers "did not want to support OS/2 any more," he said.
Mentis Corp., Durham, N.C., recently predicted that 55% of financial institutions with more than $1 billion of deposits will run Windows NT on server computers by 1999, up from 18% currently.
Compounding Edify's problems, its director of sales left at the end of last year in the midst of implementing a new strategy, which was to concentrate efforts on selling its Electronic Banking System software product.
"There was kind of a disruption in the selling cycle," Mr. Zimmerman said. "It was tough. We just did not manage the pipeline as well as we usually do."
Edify's problems were apparent in its first-quarter results. Revenues of $13.8 million fell well short of the $17 million that Goldman, Sachs & Co. analyst Michael Parekh had projected. The expected earnings per share of 4 cents became a loss of 9 cents.
The earnings report caused Edify's share price to dive 39% on April 6, to $11.25. The stock was at around $9 Friday, down 59% from its 52-week high.
Mr. Parekh says the sales momentum is back. Edify hired Joseph G. Brown as vice president of worldwide sales in May and has shipped Windows NT- based software to more than 100 customers in six months. He expects the company to "resume its previous trend of meeting and/or exceeding quarterly expectations" in the second half.
Goldman Sachs reiterated its "market outperformer" rating. The 12-month price target is $14.
Edify's Internet banking software has been sold to 60 institutions, including 11 of the 100 largest in terms of assets.
"Edify's ability to sell and close is critical, because these deals are being sold and closed now," said Chris Musto, senior analyst at Gomez Advisors, Concord Mass., a consulting firm that follows Internet financial services.
"They have a competitive product," but that does little good if it cannot be marketed properly, he said.
Prominent Edify customers include Signet Banking Corp., which was bought by First Union Corp., and Harris Bankcorp of Chicago, a subsidiary of Bank of Montreal. Chase Manhattan is the largest buyer of the Electronic Banking System and is expected to go live this year.
With $40 million in cash on hand and 400 employees, Edify is well equipped for major installation projects, said William A. Soward, director of financial applications marketing.
