A profit alert from Harbinger Corp., a provider of payment software and electronic data interchange services, triggered a steep decline in its share price.
It fell $3 Thursday, to $4.25, after the Atlanta company said third- quarter revenues would be $2 million below the expected $37 million. Per- share earnings from operations will be between 4 cents and 8 cents, the company said; the Wall Street consensus estimate was 11 cents, according to First Call.
At midday Friday, Harbinger was trading at $4.0625, down 18.75 cents. It will report third-quarter results Oct. 21.
Harbinger's problems, combined with those of others in the emerging electronic commerce field, illustrate the perils of business-building in a mercurial market. Company officials did not return phone calls seeking comment.
Harbinger operates a private network for businesses to exchange electronic data interchange messages. Apart from preparing for year-2000 conversions-which Harbinger officials said is partly to blame for its troubles-banks and corporations have many Internet-based electronic commerce services from which to choose.
"There is an incredible amount of confusion," said Neeraj K. Vohra, analyst at Friedman, Billings, Ramsey & Co., Arlington, Va. "Potential customers are unsure whether they should go to the Harbingers and Sterling Commerces of the world, to consulting companies, or to the hundreds of little start-up companies."
Harbinger's problems seemed to rub off on its closest competitor Sterling Commerce. Its shares dropped $8.75 Thursday, to $25.875. A downgrade from Gary Craft, an analyst with BancBoston Robertson Stephens, from "buy" to "long-term attractive," sparked the selloff.
Dallas-based Sterling Commerce also operates a centrally managed business network, which predated the Internet boom. Despite its reputation for top-notch management, Sterling's high-margin network operation will be challenged by the widely accessible and cost-effective Internet. "There is only so much that a good management team can do," Mr. Craft said.
Whereas it once cost about $200 for a business to transmit a megabyte of information on a private network, the cost on the Internet is "close to zero," he added.
"The Internet is a revolution," Mr. Craft said. "This is a major transformation in the way businesses communicate with one another."
Harbinger also faces several company-specific issues, analysts said. Recent acquisitions-in particular, the 1997 purchase of Premenos Corp.-have posed integration difficulties, leaving a portfolio of 60 overlapping products and services.
Harbinger said it will cut its product line in half and write off about $6 million in previously booked accounts receivable. In a cost-cutting move, it plans to cut 110 jobs, or 10% of its staff.
In addition to the $6 million provision, Harbinger will take a restructuring charge of up to $20 million in the third quarter.
"They are stepping on land mines-and they laid the mines themselves," said Bill Burnham, analyst at Credit Suisse First Boston Corp.
He accused Harbinger of "investing in the wrong projects, writing in revenues that are not going to come, and putting the wrong people in charge."
David Leach, the former chief executive officer, is stepping aside to be vice chairman. James Davis, former president and chief operating officer, will become a group executive.
C. Tycho Howle, chairman, will add the title of CEO. James M. Travers, general manager of Harbinger's software solutions unit, was elevated to president and chief operating officer.
First Mortgage Network has received $15 million of financing from Intuit Inc. and three venture capital firms.
The Plantation, Fla., mortgage technology pioneer primarily sells loan origination software and outsourcing services for Internet and call center operations.
Intuit's $6 million will help First Mortgage Network fulfill contractual obligations with Intuit to develop a loan processing capability for the Internet. Intuit, best known for its Quicken personal finance software, is a licensed real estate broker and operates the quickenmortgage.com Web site.
The funding will also help First Mortgage Network fund new loans and add staff.
Intuit, the largest investor, has a 6% stake in the company. The other investors are Technology Crossover Ventures, Dominion Capital, and Canaan Partners.