Bank Hapoalim

doubts that e-business solution provider


(Nasdaq:BWEB) can attain an operating profit in the fourth quarter of this year, due to the global slowdown and the fall-off in the information technology market where BackWeb now operates.

Accordingly, the bank has downgraded BackWeb from a Buy to a Hold rating, and set a price target of $2.6, which is 13% more than the share's current market price.

The bank expects the firm's sales this year to reach $30.7 million. It also projects a loss for the company of $26.34 million, or 59 cents per share, excluding one-time expenses.

The company's results for the first quarter matched the lower estimates it provided in its profit warning, the second it has issued since April.

BackWeb blamed its declining results on the worldwide slump, saying that closing deals is only getting more difficult, and Internet-telephony acquisitions are being frozen.

The bank says that in such hard times it is especially difficult to 'educate' the market to abandon traditional email services, in favor of the more advanced push technology. The bank adds that the company is facing this difficulty, even though as of its fourth quarter of 2000 it has focused on divisional sales, which are easier to close compared to corporate-level deals.

Hapoalim's analyst Shai Kamin says that although the BackWeb executive hopes to reach an operating profit in the fourth quarter this year, he doubts that it is possible. That's despite a BackWeb plan to cut operating expenses by 10% to 15%.

The company's cash burn rate is $10 million to $12 million per year, and it is expected to finish the year with cash reserves of $45 million.

Kamin says that during the past two quarters BackWeb's management has been trying to focus on segments of the economy that are more resilient to the economic decline. But at present, Kamin says he cannot discern any sign of recovery in the information technology market, which is what BackWeb needs if it is to expand its customer base, and guarantee future growth.