Skip to main content

Wall Street, responding to



generally positive preannouncement of second-quarter earnings, bid the stock up a bit Thursday.

In recent trading, shares were up 23 cents to $34.03, after a slight drop immediately after the announcement.

Cognos said it will cut 6% of its staff, about 210 positions, in a move to improve margins. The company expects to save about $13 million in the last two quarters of fiscal 2007 and $28 million annually. It will take a $27 million charge as a result, the company announced before Thursday's opening bell.

TheStreet Recommends

The Ottawa-based company raised guidance for the quarter saying it expects revenue of about $228 million, the high end of previous guidance that ranged from $220 million to $228 million. It said earnings will exceed earlier guidance of 16 cents to 20 cents a share but did not give a specific figure.

Wall Street was looking for a profit of 25 cents a share on sales of $226.1 million.

The business intelligence software maker's forecast of license revenue, ranging from $77 million to $78 million, was below expectations.

ICAP software analyst Richard Williams, one of at least two analysts to downgrade Cognos after the announcement, had forecast license revenue of $84 million. "It was a hard call," he said in an interview, "but the miss in license revenue is a yellow flag."

Williams said he is concerned that the company's move to raise margins by decreasing staff could indicate that the sales pipeline is weakening. "You don't cut staff when sales look strong," he said. (ICAP does not have an investment-banking business.)

Despite the layoffs, the company said it will hire an additional 20 to 25sales representatives by the end of the fiscal year. The cuts will largely fall on management and non-revenue-generating positions.

Cognos will report final second-quarter results after the close of trading on Sept. 21.