For the second consecutive quarter the Atlanta banking software company S1 Corp. has lowered its revenue guidance.
S1 also said Monday it has cut its work force by 8% and is closing some facilities to reduce its operating expenses by $20 million to $22 million this year.
In August, S1 said it expected to report third-quarter revenue of $61 million to $64 million, excluding expected severance charges. On Monday it lowered that range to $57 million to $58 million.
Chris Watson, S1's vice president of marketing, said that he could offer "no particular reason" for the shortfall, and that the company would provide more details when it reports its quarterly results Nov. 3.
Ms. Watson said the job cuts have been made primarily in sales and administration.
S1 is also restructuring itself. Matt Hale, its chief financial officer, has taken over North American retail banking, global wholesale banking, and insurance operations. He will be assisted by John Stone, who has been promoted from global controller to senior vice president of global finance.
For the second half of the year, S1 expects to report about $14 million to $15 million of severance charges, including $8 million for the current quarter. Some of the money will go to Jaime Ellertson, the chief executive who was ousted July 25. S1 also reduced its guidance at that time, and James "Chip" Mahan 3d, S1's chairman, took over as the CEO; he had previously held the same title from 1995 to 2000.
One of Mr. Mahan's first decisions after succeeding Mr. Ellertson was to delay the release of the next version of S1's Enterprise software package. Mr. Ellertson had said it would be released this summer, but Mr. Mahan said in August that the release would be delayed until the fourth quarter or early next year. On Monday, Ms. Watson said it would likely be released in the first quarter.
John Kraft, an analyst with the investment firm D.A. Davidson & Co. in Great Falls, Mont., said that analysts and investors have criticized S1 for its low profits. In 2004, it posted $241 million of revenue and $15.6 million of net income. In 2003 it lost $38 million on $247.6 million of revenue. "This is a $250 million revenue company that's barely, if at all, profitable," he said.
He applauded S1's plan to increase profits by reducing costs. "There's got to be places to cut."
One of the reasons for S1's falling revenue could be a shift in its pricing model. By adopting a subscription model in August of last year, the company sacrificed higher up-front payments in favor of contracts that deliver more stable recurring payments.
Mr. Kraft said investors will probably be willing to ride out Mr. Mahan's changes, because they are looking for long-term gains. "Most investors that are looking at these guys aren't most concerned" about the third quarter.
If S1's third-quarter revenue comes in at $58 million, the high end of the new guidance, that would be a 7% drop from the same period a year earlier and a 6.5% drop from the second quarter.
Mr. Kraft said he is probably more critical of S1's performance than investors. "It's easier to cut costs than it is to grow revenue," and the reduced revenue estimate "doesn't make me more confident."
By midday Monday, S1's stock price had tumbled 9.8%, to $3.86 a share.
