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A perfect storm of macro and micro economic factors disrupted software sales in June, forcing at least two dozen vendors to tell investors they would not meet quarterly financial targets.

Behind the ugly June swoon were dips in sales to key customer segments, forecasts based on incomplete information and ironically enough, the Sarbanes-Oxley Act, once seen as an important sales driver.

Companies that missed the mark included relatively small vendors such as


( FILE), as well as major players such as





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Siebel Systems

( SEBL) and

Computer Associates

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Perhaps most surprising was the rapidity with which the wheels seemed to come off software's cart. Veritas, for example, announced its major miss just three weeks after reaffirming a set of upbeat predictions.

The parade of warnings stunned Wall Street. "Although I have been covering the software space for just under 10 years as a senior analyst, last week by a long shot counts as the most surprising, disappointing and most filled with preannounced earnings misses that I can think of since I started my career on Wall Street," Lehman Brothers analyst Neil Herman wrote in a note to clients.

How could so many companies be so far off the mark? After nearly two weeks of hand wringing and head scratching by analysts and investors alike, it's becoming clear that factors affecting the software industry as a whole came together in what Rick Sherlund of Goldman Sachs called a "perfect storm." Most significantly:

Sales to customers in three key segments -- retail, telecommunications and financial services, which account for 21% of technology spending, Sherlund said -- dipped near the end of the quarter, when many software companies close most of their businesses.

Customers are now involving more high-level executives in major buying decisions, a fact of life that makes it harder for sales representatives to forecast when deals will close.

Many large companies are struggling to meet compliance deadlines for Sarbanes-Oxley, and that's sucking up major IT staff time as well as dollars. Among other things, the act requires management to explicitly take responsibility for establishing, maintaining and testing an adequate internal control structure. Moreover, businesses are reluctant to make significant changes to major software until they have documented and tested all major business processes, said analyst David Rudow of Piper Jaffray.

Making life all the harder for vendors is the apparently permanent expectation by customers that they'll get a major discount by haggling hard and waiting until the very end of the quarter to make purchases. "It's a buyers' market and they're addicted to the 50% plus discount rates they've been getting the last two years," said Erin Kinikin, a vice president of Forrester Research.

Siebel, she said, had the same number of deals as last quarter but almost a 25% drop in average selling price. And although it's impossible to quantify, some analysts think that well-publicized discussions of cutthroat pricing during the


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antitrust trial reinforced that sense of entitlement.

Unlike hardware companies, software companies book nearly all of their business at the end of the quarter. And since software vendors give guidance at the beginning of the quarter, a fair amount of guesswork is always involved, and the estimates of sales people in the field are weighted heavily.

Experienced software salespeople know when their clients are likely to buy, but since the technology bubble burst, they have lost a good deal of what insiders call "visibility," said software analyst Sheryl Kingstone of the Yankee Group. "There are people in the buying loop now that they don't know well, and that makes it tough for them to forecast accurately," she said.

Case in point, FileNet: According to First Albany analyst Mark Murphy, "a handful of North American transactions failed to close in the final days of the quarter

as top executives put the deals on hold, overriding verbal commitments from IT executives." By the end of the quarter, six to eight transactions valued at $1 million to $2 million in license revenue had unexpectedly slipped away, the company said.

Rob Tholemeier, a vice president at Halpern Capital in Aventura, Fla., argues companies are simply changing the way they buy infrastructure software, but vendors haven't mastered how to account for this in their sales projections. What customers are doing now, he said, is buying a small amount of software -- or using a test copy -- and then adding licenses for users after they have gone live with the software. By contrast, in the old days companies would buy everything they needed upfront for millions of dollars.

It's also worth noting that


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may have inadvertently hurt other vendors as customers who signed $800 million worth of upgrade contracts two years ago needed to negotiate new ones, said Lehman's Neil Herman. "Customer re-signings with Microsoft could have caused them to delay other software commitments and at the margin could have played a role in the end-of-the-quarter problem," he said. (Microsoft will report its fiscal fourth-quarter results on July 22.)

When will the software storm abate? Not immediately. The quarter ending Sept. 30 is historically slow, in part because so many key decision makers are on vacation.

But the weather might clear toward the end of the year. "We believe the deals are being delayed, not cancelled," said Piper Jaffray's Rudow.

Sherlund said the severity and the significance of the software downturn may have been exaggerated. "Aggregate license revenue of the top four enterprise applications vendors continued to grow during the quarter," he noted.

For now, though, better hold on to those umbrellas.

Staff reporter Ronna Abramson contributed to this story.