Revenue slowdowns associated with year-2000 problems might be old news to some, but not to Fundtech Ltd.
The Jersey City, N.J.-based payments software vendor said Wednesday that its third-quarter revenues would be down a whopping 30% from Wall Street's expectations, to around $7 million. Per-share profits are expected to decrease by 10 cents, to 21 cents. Official results will be released within two weeks, executives said.
Reuven Ben-Menachem, Fundtech's chairman and chief executive officer, blamed ongoing year-2000 concerns, noting that payments software is a highly mission-critical operation in any bank. Despite Fundtech's year 2000-compliant software, banks are not interested in tinkering with their systems.
"We are very disappointed in these financial results," Mr. Ben-Menachem said in a conference call with Wall Street analysts, adding that the revenue slowdown would be temporary.
"We were notified by some large clients that we are the selected vendor," he said. "We believe the deals will come to closure between now and the end of the first quarter."
The news caused the stock to drop 47% on Wednesday, to $10.5625, on trading volume of 3.2 million shares, which is more than 15 times its daily average. The stock closed Friday at $12.9375, down 43% for the week.
Though it is not the first company to blame the year-2000 bug for its woes, Fundtech's problems surprised Wall Street this late into 1999.
Richard Zandi, analyst at Salomon Smith Barney, said the severe drop warrants further investigation. In the first half of 1999, the company's revenues grew 101% from a year earlier, to $16.9 million.
"I think the company is in a great market and is a strong vendor," he said.
Fundtech is attempting to build its business in a number of ways, including acquisitions, product development, and international expansion.
"My concern, given the magnitude of the revenue shortfall, is that Y2K issues were exacerbated because the company has so many moving parts," Mr. Zandi said.