Fair, Isaac & Co.'s announcement last week that it would form two business units to serve companies in electronic commerce and telecommunications landed with a thud.

The stock price of the San Rafael, Calif., company, best known for software that rates people's creditworthiness, closed Friday at $36.9375, down $9.4375 from a week earlier and from a high of $54.5625 on Jan. 27.

Investors seemed to be reacting to Fair, Isaac's sketchy details on the plan. Peter L. McCorkell, senior vice president of corporate affairs at Fair, Isaac, said shareholders may be "upset" because the company has not disclosed the size of its investment in the units.

Amor H. Towles, an analyst at Select Equity Group in New York, said portfolio managers are bracing for poorer financial performance in fiscal 2000, an attitude he called an "over-reaction."

He said the stock's drop "probably reflects some suspicions that there is a problem in the underlying business," but he disagreed- upgrading the stock Thursday to "buy" from "hold."

Fair, Isaac's underlying business remains strong, Mr. Towles said, and revenue from its core banking business should fuel a 20% growth rate for several years. The company will try to keep investments at a level that would not trim earnings, he said.

Its fiscal 1998 revenues were $245.5 million, up 23% from fiscal 1997. Net income was $24.3 million, up 17%.

Larry Rosenberger, president and chief executive officer of Fair, Isaac, did not specify the impact on financial performance expected from the new units in fiscal 2000, which begins Oct. 1.

Without revealing further details, he said Fair, Isaac would offer to its prospective customers integrated versions of the decision support, fraud prevention, and customer acquisition and retention software it already sells.

For example, it would sell behavior-scoring software to help telecommunications firms track customer use patterns and reduce switching.

The units would be added to Fair, Isaac's divisions for financial services, from which it derives 90% of its revenue, and health care information, established last year.

Organizing around industries would help dismantle the "silos" that have grown around Fair, Isaac's five product lines, Mr. McCorkell said.

The silos formed as Fair, Isaac bought companies to serve its financial institution constituency. It bought Dynamark, a direct marketing company, in 1992; Credit & Risk Management Associates, a consulting firm, in 1996; and Risk Management Technologies, a risk management software developer, in 1997.

Now the company hopes to broaden beyond financial services. "We have almost all of our eggs in one basket," Mr. McCorkell said.

"If we are serious about wanting to get some higher degree of diversification 10 years from now, we'd better get going on it now, or we will never get there," he said.

James J. Pettit, an analyst at Hambrecht & Quist LLC, who rates the company "neutral," said he is "waiting on the sidelines to see how things progress."

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