Pegasystems Inc. executives are hoping that their earnings report, scheduled for Tuesday, will begin to repair some recent damage on Wall Street.
The Cambridge, Mass.-based provider of customer service software to large banks is coming off a string of setbacks, including some accounting irregularities.
"I think we need to show Wall Street we can demonstrate several quarters of consistent growth," said Alan Trefler, president and chief executive officer. "Ultimately, that is what all investors want to see."
Problems began to hit after Pegasystems began opening offices two years ago in Canada, Europe, and Asia. The size of its work force increased to 550, from 150 in July 1996.
"In a lot of ways, we became a bit overwhelmed with the opportunity," Mr. Trefler said. He added that he "learned the hard way" never to underestimate the risks of rapid growth.
Pegasystems' growing pains came to light last Oct. 30, with the revelation of problems in the way it booked revenues. The company was forced to restate earnings from the third quarter of 1997.
It reported a net loss of $12 million for the fourth quarter, compared with net income of $4.5 million a year earlier. Revenues declined 54%, to $10.4 million.
The stock price has tumbled. Falling from a high of $30.875 on July 31, 1998, it closed Friday at $4.50.
"What we now need to do is catch our breath and do a good job of taking care of our customers," Mr. Trefler said.
The company has initiated a restructuring aimed at aligning itself more closely "to the goals of customers," he said.
For example, Pegasystems seeks to add Internet capabilities to its customer service software. The software helps banks, insurance companies, and credit card organizations provide consistent service across all their distribution channels.
Pegasystems also plans to develop partnerships with third-party distributors on a private-label basis.
It has reached an alliance with BroadVision Inc., a leader in the market for one-to-one relationship management software, to jointly develop systems for call centers and Internet-based self-service.
In a separate deal, Pegasystems and Carreker-Antinori Inc. signed a letter of intent to develop software for check exceptions, research, and adjustments.
Pegasystems' chief financial officer, Richard B. Goldman, has left, and James O'Halloran, a former director of Arthur Andersen's worldwide enterprise practice, is assuming the role on an interim basis.
Pegasystems remains a "show me" stock, with the four financial analysts that follow it maintaining "hold" ratings.
William Bradway, an analyst at Meridien Research, said Pegasystems has enjoyed a phenomenal run of developing "workflow engine-oriented" products and services. But financial institutions may prefer to buy tailored solutions for specific business needs and incorporate Internet technologies, rather than workflow applications, he said.
Pegasystems will be challenged "to match up with those needs and capabilities and competencies," Mr. Bradway said.
