With an estimated $33 Million in overstated earnings and a loss of $11.4 Million in Q1, what's ahead for PTC?
by Ira Breskin
Parametric Technology Corp. hope the worst is behind them. PTC should
break even during its 2003 fiscal second quarter ending March 30, C. Richard Harrison,
company president and CEO, said during an analyst presentation on Tuesday, January
14th. More specifically, PTC must generate about $180 million in quarterly sales to break
even, added Thomas Beaudoin, PTC's acting CFO.
PTC's inability to hit that target during the fiscal first quarter, when it generated
$171.9 million in sales, resulted in the company's net loss of $11.4 million, or 4 cents a
share. The loss comes after PTC officials in October predicted a break fiscal first quarter.
"Beyond the current quarter, we see the challenge for shares of PTC as meeting
Wall Street estimates on a consistent basis. We believe a fundamental turn around (i.e.,
growing revenue) is secondary to the story for driving shares higher," said Gene Munster,
an analyst with US Bancorp Piper Jaffray.
Moreover, comparable historic results aren't available because PTC now is
completing the restatement of financial results for past three years. It's doing so after
learning that it prematurely booked sales of maintenance services for its MCAD and
PLM software packages.
The upshot: PTC must restate a total of $33 million in previous sales that should
have been deferred and recognized during this and subsequent years. The projected $33
million restatement is higher than the $20 million to $25 million estimate that company
management offered late last month.
The timing of such a restatement is bad given investors' decreased tolerance for
such adjustments following unrelated accounting scandals at Enron and Worldcom.
PTC discovered the overstatement after installing a sophisticated automated
accounting system for maintenance services.
"While the magnitude of the increase in restated maintenance revenue appears
minimal, investors may perceive this as a more significant discrepancy," US Bancorp's
"It's just a credibility issue" that will retard PTC winning back investors, Munster
said during a telephone interview. He continues to rate PTC a long-term buy.
The upside potential for PTC's fiscal 2003 performance is tied, in part, to the
company's planned introduction next month of Pro E Wildfire. This application software
is an Internet-enabled version of PTC's popular Pro/Engineer mechanical CAD software
that incorporates much of the capability of Windchill, its leading-edge collaborative
Ira Breskin, a freelance editor/writer specializing in business and technology issues, is a frequent
contributor to Business Week, Newsday, and the New York Times. He holds a B.A. from
Columbia University and a Knight-Bagehot Fellowship in Economics and Business Journalism,
Columbia University Business School. He may be reached at
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