JP Morgan Downgrades Documentum

Analyst Sterling Auty says the stock is unlikely to outperform until Documentum can show better license growth

Documentum (DCTM ) sees a weaker than expected $68 million in second-quarter revenues, and earnings per share on a GAAP basis of one cent. JP Morgan downgraded its investment rating on the shares to neutral from overweight. Analyst Sterling Auty tells Standard & Poor's MarketScope the second-quarter revenue shortfall came from delays in government contracts, the soft economy, and weakness in Northern Asia. He says this not a bad miss overall, but the stock is unlikely to outperform until Documentum can show better license growth. Therefore, he downgraded the shares. Meanwhile, Auty says margin expansion continues; non-GAAP earnings per share is still seen at 7 cents to 9 cents, meaning the company saved about $2 million more than he expected in the second quarter. The analyst cut his 2003 non-GAAP earnings per share estimate from 38 cents to 33 cents and his $300.8 million revenue forecast to $278.3 million. He also lowered his 2004 forecasts for non-GAAP earnings per share from 60 cents to 50 cents and for revenues from $345.3 million to $315.2 million.

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