Updated from 5:09 p.m. EDT

J.D. Edwards ( JDEC) on Wednesday reversed a net loss from a year ago, beating earnings estimates for the fourth-consecutive quarter, but reporting license revenue that fell short of prior guidance.

The company's fourth-quarter guidance pegged earnings in line with Wall Street estimates but with revenue falling a shade under analysts' expectations.

"I'd say in the scheme of things not a bad quarter, just not as good as people had been hoping for," said Morgan Stanley analyst Chuck Phillips, who has an equal weight rating on J.D. Edwards. "But any sequential improvement in this environment has to be worth something." His firm has done banking for J.D. Edwards.

The Denver-based software maker reported net income of $9.5 million, or 8 cents a share, in the third quarter, as calculated by generally accepted accounting principles, compared with a net loss of $185.9 million, or $1.65 a share, in the same period a year earlier. Last year's loss included a $135.4 million provision for income taxes and a $21.7 million restructuring charge.

Excluding charges, J.D. Edwards said it earned pro forma net income of $10.1 million, or 8 cents a share, in the third quarter, compared with a pro forma net loss of $3.2 million, or 3 cents a share, a year earlier.

The company had guided to earnings of 6 cents a share, and Wall Street estimates were in line with guidance, according to First Call/Thomson Financial.

J.D. Edwards said revenue rose 9.4%, to $229 million, from $209.4 million a year earlier and 2.4%, from $223.6 million in the previous quarter. That also beat Wall Street revenue estimates of $222.2 million.

License revenue, however, came in short of the company's previous guidance of $58 million. License revenue rose 9.8%, to $54.9 million, from $50 million in the year-ago period and 1.5%, from $54.1 million in the second quarter.

That license revenue did not include a significant customer relationship management deal closed with Fidelity Investments, which will be recognized in future quarters as the project is completed. "The fact that they came close to the guidance and didn't recognize their biggest deal for the quarter kind of reinforces it's not a disaster," Phillips said, referring to the Fidelity win.

Operating margins -- a key metric that investors have cited as an opportunity for improvement -- rose to 6.1% from 5.1% in the previous quarter.

"That's the whole point of the story," JMP Securities analyst Pat Walravens said of the operating margin improvement. "You have got a company that has been relatively mismanaged, and you now have a management team in there who knows how to tighten the ship." Walravens has a strong buy rating on J.D. Edwards and his firm hasn't done any banking with the company.

Excluding charges, J.D. Edwards projected license revenue for the fourth-quarter to come in at $75 million and services revenue to come in at $170 million, resulting in total revenue of $245 million. That's a little short of Wall Street estimates of $252.1 million in fourth-quarter revenue.

J.D. Edwards said it is expecting to post pro forma earnings per share in line with Wall Street estimates of 11 cents a share for the fourth quarter.

That did not come as a surprise to Walravens, who lowered his fourth-quarter license revenue estimate to $73 million from $81 million about two weeks ago. In a note at that time, he determined that the median sequential growth rate in fourth-quarter license revenue was 41% in the past four years. The company's guidance represents a 36% sequential increase in license revenue.

"Given the challenges in the marketplace and what we see as the market opportunity we've put out what we consider to be a fair and aggressive Q4 guidance," CEO Bob Dutkowsky said in an interview after the company announced earnings. Dutkowsky, who added chairman to his title in March after becoming CEO in January, characterized the third quarter as step forward in the company's turnaround.

Morningstar analyst Mike Trigg said he was expecting fourth-quarter license revenue in the low 80 mllions, and suggested the company may be estimating lower because the end-of-the-year budget flush many have been expecting to boost fourth-quarter results may not materialize. "I think the reality is most CIOs are being rewarded for not spending," Trigg said. His firm doesn't do banking business and he has not recommended buying the stock because he believes its fair value is currently $10, lower than the trading price.

Shares of J.D. Edwards declined 58 cents, or 4.7%, Wednesday to close at $11.85. In after-hours trading, shares moved up to $12.88.

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