Updated from 4:39 p.m. EST

Net income, revenue and new licenses all declined during Cognos' ( COGN) fourth quarter, but because expectations were quite low the business-software maker on Thursday beat Wall Street's numbers.

The company's EPS guidance for the first quarter, which includes currency fluctuations and the cost of expensing stock options, also was low.

Shares dropped quickly after the announcement, but as Wall Street had time to digest the numbers about half the loss was made up. Cognos was recently off 57 cents, or 1.5%, to $37.58 in after hours trading on Instinet,

Revenue in the fourth quarter fell to $253.1 million from $256.3 million a year ago. Net income was $44 million, or 48 cents a share, down from $54.3 million, or 58 cents a share.

In addition, license revenue, a key metric of new business, dropped to $117.9 million from $129.9 million.

Analysts polled by Thomson First Call were looking for a 38-cent a share profit on sales of $238.6 million and license revenue of about $95 million.

Looking to the first quarter, the company told investors to expect a profit ranging from 15 cents a share to 19 cents a share including the options expense on revenue of $210 million to $218 million. Analysts were projecting a 28-cent-a-share profit, before options expenses, on sales of $216 million.

Cognos said that without the options expense EPS for the first quarter would likely be 5 cents higher. CFO Tom Manley added that the increasing strength of the Canadian dollar, his company's home currency, will cost the company about 4 cents a share in the first quarter.For the full fiscal year, the company expects to earn a profit of $1.20 to $1.27 a share, including a 23-cent-a-share charge for the expense of options, on sales ranging from $940 million to $960 million. Wall Street was looking for $1.51 a share on $951 million in revenue. First Call estimates don't include the options charge.

The fourth quarter ended a year that Cognos management would probably like to forget. Weighted down by a rough transition to Cognos 8, the new version of the company's flagship business-intelligence software, and poor execution by its sales force, Cognos missed two of the previous three quarters.

Manley said in an interview that the execution and transition issues associated with Cognos 8 "are largely behind us," and he added that in the software's first full quarter of availability it brought in $55.5 million in revenue, a company record for a new release.

Manley and CEO Robert Ashe downplayed the competitive threats posed by Microsoft ( MSFT) and Oracle ( ORCL) to the company's core business intelligence franchise, saying that neither company has gained much traction. Microsoft has added business intelligence capabilities to its SQL Server 2005 database software and will add it to server-based versions of Office, and Oracle now own the business intelligence capabilities of Siebel Systems, which it purchased earlier this year.

Over the last 12 months shares of Cognos have performed poorly, depreciating by 8%, while head-to-head rival Business Objects ( BOBJ) appreciated by 37%.

Cognos has recovered somewhat, gaining 9% so far this year, while Business Objects, which often sags when Cognos surges, is off 10%.

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