Analysts Downgrade Kana's Stock After Q4 Results

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Analysts downgraded the stock of Kana Communications Inc., Redwood City, CA, yesterday after the company reported fourth-quarter results that were below the analysts' estimates.

The company, a provider of enterprise relationship management software, reported a loss of $33.2 million, or a loss of 37 cents per share, on revenue of $42.4 million for the fourth quarter. Analysts were expecting the company to report a loss of 20 cents per share.

In the same quarter a year ago, Kana Communications reported a loss of $12 million, or a loss of 23 cents per share, on total revenues of $6.4 million. For the full year in 2000, the company reported a loss of $89.6 million, or a loss of $1.09 per share, on total revenues of $119.2 million.

Goldman Sachs analyst Lilly Bahramipour lowered her investment rating on the company to "market performer" and removed its shares from the brokerage's "recommended list." She raised her full year 2001 loss estimate to a loss of 39 cents per share from a loss of 29 cents.

Kana Communications said it expects to be cash flow positive in the third quarter this year and to attain profitability in the fourth quarter. However, analysts said they expect that the company would only reach breakeven in the fourth quarter and that it would not be profitable until 2002.

The company said its poor performance was because of "execution problems" in its professional services division and higher-than-expected costs.

Lazard Freres & Co. LLC analyst Dana Serman lowered his 2001 revenue projection to $201 million from $237 million and raised his full-year loss estimate to 32 cents from 29 cents.

"The issue facing Kana is simple: Corporations are reviewing, delaying or waffling on many discretionary IT items," he said. "Kana's solutions are new technology and may not be viewed as 'mission critical' by many corporations. Until we see evidence of an improving macro environment, we will continue to rate Kana's shares a 'hold.'"

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