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CheckFree Shares Drop More Than 25% in August

Shares of electronic bill presentment and payment service provider CheckFree Corp. fell more than 25 percent in August.

After starting the month at $31.35, the stock price has lost more than $9, closing at $21.56 yesterday.

On Aug. 23, CheckFree's shares fell to $20.78, nearing its 52-week low of $20.61. Its 52-week high is $62.50.

Precipitating this fall was CheckFree's earnings report for fiscal 2001, which ended June 30. The company said it lost $363.1 million, or $4.49 per share, up from a loss of $32.3 million, or 61 cents per share, a year ago.

Revenue for 2001 rose to $433.3 million, from $310.1 million in fiscal 2000. The company's loss from operations in fiscal 2001 surged to $464.7 million, from $43.4 million a year ago.

However, CheckFree chairman/CEO Pete Kight said he was pleased with the company's subscriber growth for the fourth quarter and the year. The subscriber base grew 49 percent from 3.5 million in fiscal 2000 to a little more than 5.2 million in 2001.

“We made important gains in each of our divisions this year, which collectively will advance and protect CheckFree's market advantage,” said Pete Sinisgalli, the company's president and chief operating officer. “Our e-commerce division continued to extend its leadership across all metrics important in the electronic billing and payment market.”

The company warned in its year-end report that in its fiscal first quarter, revenue should be $116 million to $121 million, below analysts' estimates of $122.5 million. CheckFree attributed the lower revenue to a seasonal drop in software license sales.

CheckFree distributed 500,000 bills electronically in June, up from 94,000 a year ago. At this rate, the company is on schedule to deliver 6 million bills for the year. Transactions processed in June rose to 22 million from 16 million a year earlier. The percentage of transactions processed electronically rose to 64 percent in June, from 58 percent in 2000.

Despite its declining stock price and dismal earnings report for fiscal 2001, analysts are upbeat about CheckFree's prospects for 2002 and beyond. The analysts said they expect e-commerce revenue to fall slightly to $83.1 million in the first quarter of fiscal 2002, down from $84.3 million in fourth-quarter 2001. They also expect the company to have 5.6 million subscribers at the end of the first quarter of 2002.

“No other competing solution comes close to the scale and end-user penetration that CheckFree has amassed,” said David Easthope, an analyst with Friedman, Billings, Ramsey & Co. Inc. “In 2002, we should see continued execution and end-users migrate to the platform.”

Easthope warned, however, that CheckFree's new customers seem less likely to do as many transactions as previous clients.

“In other words, while CheckFree is adding new end-users to its platform, these customers appear to be less active with the [company's e-commerce] product,” he said.

In other news, Gemstar-TV Guide International acquired Skymall Inc. Direct Focus Inc. had a 3-for-2 stock split.

Portfolio Value: If $1,000 had been invested in each of the 100 companies in the DM News Portfolio at the start of the year — for newly public companies, when the stock first closed — the value would be $127,511, up 27.51 percent.

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