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In Truth, Verity "Is Looking Strong"

Verity (VRTY) is one of the few techs to go public during the 1990s and survive--with earnings to boot. This provider of software for corporate intranets and e-commerce sites "has a very strong balance sheet, with no debt and net cash of $6.50 a share," says Jonathan Cohen of JHC Capital Management in Greenwich, Conn., who owns shares. Verity, which went public in 1995 at 6 a share and now trades at 10.66, posted strong earnings and revenue growth from 1999 through the fiscal year ended May 31, 2001, as sales climbed from $64.4 million to $145 million and earnings grew from 44 cents to 92 cents a share. But as capital spending dried up, business faltered: In fiscal 2002, sales slid to $93 million, and earnings to 8 cents.

Nevertheless, earnings in the third and fourth quarters of fiscal 2002 showed strength and beat estimates. And the first fiscal quarter of 2003 "is looking strong," says Cohen, who sees the stock doubling in a year. "With its cash and clean balance sheet, Verity is a possible takeover target by large enterprise-software companies, as the industry consolidates," he says. It's very well-positioned, he adds, against rivals Inktomi and Autonomy. First Call figures Verity will earn 33 cents a share in fiscal 2003 and 47 cents in 2004. On July 22, the Defense Dept. announced it had integrated Verity software into its new message-handling platform, involving more than 40 sites. By Gene G. Marcial

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