NetManage stock bottoms out

NetManage's (NETM) stock inched-toward its all-time low today after it confirmed negative fourth-quarter results.

The company's stock has hovered around its 52-week low of 4-7/8, since it announced last week it would report a net loss for the fourth quarter, due to slowed international sales and one-time charges.

The stock closed at 5, down from yesterday?s close of 5-3/16.

NetManage, which provides hardware and software for corporate intranets, today reported a net loss of $12.6 million, or 29 cents a share, compared with net income of $3.3 million, or 8 cents a share, for the same period last year.

The net loss includes fourth quarter write-offs of $13.4 million for on-going research and development associated with the purchase of technology from Applicom Industries and U.S. Computer, and $1.3 million in costs associated with the company's discontinued ChameleonNFS for Mac OS and XoftWare for Mac OS product lines.

Wall Street, which revised its expectations downward after the company announced its preliminary results, estimated the company would report an operating loss of 1 cent a share, according to First Call, which gathers a consensus of estimates.

NetManage's fourth-quarter revenue dropped to $19.4 million, from $31.2 million last year.

"The TCP/IP software companies were totally swept aside by the Web, and they tried a little too late to convert to Web leadership," said Robertson Stephens analyst John Powers. "The market leadership was swept away from underneath them."

But NetManage's products may not be obsolete. Instead, the company said, it just has an image problem.

"People still perceive us today as a TC/PIP stack company, but that is [only] how we started," said NetManage CFO Walter Amaral. "We provide applications and not the stack itself. So it is not a case of being left behind, the market for our products and it is still there in a big way. People still need to connect to a mainframe."

Misconceptions along with poor sales have dragged this company, which topped a recent list of the 50 fastest-growing Silicon Valley companies, out of the limelight.

"We made some changes in our U.S.-sales organization, and those changes were not the right things to do. We changed people from territory-based to customer-based. We have gone back to our old methodology," said Amaral.

Sales representatives were limited to a certain list of potential customers, instead of an entire region. This turned top salespeople into frustrated employees, added Amaral.

The company is currently evaluating how to get back to profitability.

During the current quarter, NetManage will increase the amount of distributors in Japan, as well as ship, IntraChange, an enterprise-wide infrastructure that allows every contributor, developer, and administrator to create and manage all Web sites. "The important thing is that the market still needs our products...we just have not done a good job," said Amaral.

But some analysts are not convinced it will be easy for NetManage to nudge its way back into an already crowded market.

"In terms of what they are doing, a turn around would be unlikely. Right now, my rating is a 'market performer' which means that they are not going anywhere," said Robert and Stephens' Powers.