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First Albany Cuts FileNet to 'Neutral'


First Albany downgraded FileNet (FILE) to neutral from buy.

Analyst Mark Murphy says he's downgrading FileNet primarily on valuation, as the stock is nearing peak historical valuation levels on an enterprise-value-to-sales basis, currently trades at 55 times his 52 cents 2004 EPS estimate. He continues to sense that the company is addressing a healthy large deal pipeline, but is cautious on prospects for margin expansion to occur at a fast enough pace to support a materially higher valuation for the stock.

Murphy adds that, while the company's deferred revenue didn't grow year-over-year in the fourth quarter, he still thinks its installed base will grow over time, and the company has a favorable long-term position within the enterprise content management market.


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