Phoenix International Ltd., which has gotten off to a rocky start this year, is hoping for better times in the second half and in 2000.

The Orlando developer of banking software encountered difficulties in mid-January when it disclosed that fourth-quarter revenues had been below expectations. Its stock price tumbled 31% on Jan. 14, to $10.3125 a share.

But the company's problems were just beginning. It became a target of negative comments on an Internet message board, which further pressured the stock.

"The messages contained defamatory comments about our chairman and other members of our management team, saying some things that were grossly misleading," said Theodore C. Burns, chief financial officer.

Claiming the critical messages have "caused problems with our customers and employees," Mr. Burns said that on March 5 Phoenix sued six John Does who had presented themselves as current and former employees of Phoenix, as well as Yahoo!, the message board proprietor.

He said Yahoo! plans to cooperate with a subpoena seeking the identities of the six message board users.

"Our investigation has implicated a senior official of a primary competitor who has been operating under multiple aliases," Mr. Burns said, referring to the company's own investigation of the matter.

In the client/server core banking systems market, Phoenix competes with Fiserv Inc., Jack Henry and Associates, M&I Data Services Inc., and Open Solutions Inc.

Phoenix's financial problems have continued. Last Monday it reported first-quarter revenues of $5.5 million, up 20% from the year earlier.

It lost $1.3 million, compared with net income of $35,000 a year earlier.

Charles J. Wittmann, an analyst at First Union Capital Markets, said the company must meet earnings expectations for the next several quarters if the stock is to regain momentum.

"As an analyst of the industry," he said, "I think they have great momentum. As a stock analyst, I think I need more data."

Mr. Wittmann rates the stock a "hold." Phoenix's stock closed Friday at $6.0625, down 59% for the year.

Raj Shivdasani, president and chief operating officer of Phoenix, predicted that it would improve its financial performance next year. Banks are increasingly interested in replacing their 30-year-old mainframe computers, he said. Phoenix is the only publicly traded supplier of end-to- end client/server software.

The lawsuit "is a temporary anomaly," Mr. Shivdasani said, and will not distract Phoenix from developing, marketing, and supporting its software products.

"When you are a smaller company and you have something put out by people who twist the truth, creating uncertainty and doubt, it hurts a little," he said.

Phoenix has installed 77 systems since it was formed in 1995. Its largest U.S. customer is Suffolk County National Bank, Islip, N.Y., which has $900 million of assets and 120,000 customer accounts.

Carl Faulkner, managing director at Phoenix-based M One Inc., said client/server technology is "significantly better than older technologies," especially for gaining access to customer information and integrating new banking products.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.