Soundview downgraded a handful of software firms Tuesday, citing tougher price competition and valuation issues.
The technology research firm lowered its ratings on enterprise-application-integration vendors
to underperform from neutral. Soundview also cut its earnings estimates to the lower end of previous guidance.
The companies are facing deteriorating prices, after they seemed to stabilize late last year, Soundview analyst Greg Kleiner said. Amid anemic demand, competitors "are being forced to fight hard for every deal."
Kleiner now expects Tibco to post a profit of 3 cents a share in 2003. He expects webMethods and SeeBeyond to post losses of 2 cents a share and 18 cents a share, respectively.
Although the Soundview analyst isn't worried that the three companies will go out of business, he said there are concerns that the current environment won't allow them to be significantly profitable. Larger software makers, such as
, are more likely to emerge as winners from the price war, taking over a larger share of the market.
Regarding acquisitions in the sector, the Soundview report said they are on the way, emphasizing that SeeBeyond might be the only one to be bought by a larger vendor. The report added that "investors waiting for a white knight to pay a significant premium for one of the vendors are likely to be disappointed."
Shares of webMethods were 6% lower at $8.81 around midday, while Tibco was down 4% at $4.62 and SeeBeyond was down 8% at $2.54.