Verity ( VRTY) was getting a beating after hours Wednesday, down more than 26% after warning that net income in the current quarter would be well below Wall Street's expectations. In recent trading, Verity was off $4.58, or 26%, to $12.75 on heavy volume. After the market closed on Tuesday, Verity, which makes software that helps businesses search for information on their networks, said that it expects pro forma profits in the current quarter (Verity's first quarter of fiscal 2004) to range 4 cents to 6 cents a share, on sales of $26 million to $28 million. Analysts polled by Thomson First Call were expecting an 11-cent profit and revenue of $28.2 million. The company blamed the outlook on a combination of seasonally slow sales and the weak global economy. Pro forma net income for the fourth quarter was 11 cents a share, the company reported, 2 cents below analysts' expectations. On a GAAP basis, the company earned 12 cents a share. Revenue for the quarter was $29.2 million, up 11.9% year over year. For the full fiscal year, the Sunnyvale, Calif., company earned 31 cents a share, according to generally accepted accounting principles, compared to 4 cents a diluted share a year ago. Total revenue in 2003 was $102 million, compared to $94 million a year ago, an increase of 8.5%. Analyst Amy Feng of JMP Securities downgraded Verity to market perform from market outperform, saying she was concerned that the $12,000 drop in average selling prices (from $156,000) during the quarter was a sign that competitors were "desperately slashing prices" at the end of the quarter. In explaining her downgrade, Feng noted that the company plans to increase sales and marketing, and general and administrative expenses, and said "operating margins are going the wrong way." JMP Securities does not have a banking relationship with Verity.