Merriman Curhan Cuts WebMethods Rating

Analyst Gary Abbott notes that the company's turnaround effort appears to have fallen apart

WebMethods (WEBM ) lowered its first-quarter guidance to a 19 cent to 22 cent pro forma loss. Merriman Curhan cut its rating on the shares to sell.

Analyst Gary Abbott says integration server technologies are becoming critical components of enterprise application, but WebMethods has not been able to capitalize on this market opportunity. He notes, after a strong fourth quarter, the company missed its first quarter estimates, and its turnaround effort appears to have fallen apart. Abbott views the first-quarter miss as a large step backward that should take several quarters to overcome. He had based his former buy rating on: 1) product differentiation; 2) sales execution; and 3) better customer spending patterns. The analyst says the second and third points are clearly now questionable. He put his fiscal 2005 and fiscal 2006 estimates under review.

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