From Standard & Poor's Equity Research

Kronos (KRON) cut its third quarter guidance. JP Morgan cut its estimates, but kept its overweight recommendation on the shares based on valuation.

Analyst Paul Coster says management attributes a lengthening sales cycle to conflicting IT priorities within its customer base, and complex regulatory requirements for signing off on licensing deals. Coster sees no fundamental change in end-market demand, or in Kronos' sales pipeline.

The analyst cut his $1.41 fiscal 2006 (ending September) EPS estimate to $1.37 and his $1.86 fiscal 2007 forecast to $1.80 due to the third quarter shortfall, and his concern the quality of the company's sales pipeline is falling short of expectations. He is also concerned Kronos could close acquisitions in the near future that could prove dilutive. That said, Coster believes today's stock reaction looks overdone.

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