SAN FRANCISCO -- J.D. Edwards (JDEC) , struggling with a slowdown in the market for business-automation software, now faces the prospect that there are just too many of its shares in the marketplace.

The company's float, or shares available for public trading, has swelled to about 40 million shares as of February from 18.2 million in September 1997. And that's without any new equity offerings. All that added liquidity has come from a torrent of

insider selling, and analysts warn that more could be on the horizon.

"We believe this excess supply has created an overhang that is artificially depressing the stock," said Doug Crook, analyst at

Prudential Securities

in a Feb. 11 report. "Without any managed placement and with the uncontrolled and unorganized selling, we suspect supply is simply overcoming demand." Prudential Securities hasn't underwritten for J.D. Edwards.

From September to December 1998 alone, insiders sold close to 2.4 million shares worth almost $90 million, which amounts to nearly 6% of J.D. Edwards' current market cap, with most sales coming in September and December, according to


, which tracks insider trading. "By the pattern of selling, it looks like most of the selling is done quarterly in March, June, September and December," says Darrell Garner of CDA/Investnet. That means investors could see another wave of selling this month, he says.

The company says it can't comment on the swelling float, but some analysts warn that hefty selling is possible. Even with all the recent selling, Garner notes that many top insiders still hold a lot of shares. Two of the company's directors, Jack Thompson and Robert Newman, still hold some 10 million and 9 million shares, respectively.

Massive insider sales can signal that management isn't confident in the company's future. With J.D. Edwards, that may not be the case, Crook says. "We do not interpret this as lack of confidence by insiders," he wrote in a report; instead, it's "simply human nature, wanting to diversify after being 'locked up' for so long." Unlike many tech IPOs, J.D. Edwards was a mature company with more than 20 years under its belt. So insiders may have been locked into their shares for more than 10 years, Crook says.

Whatever the intentions, the flow of stock into the market makes it difficult for share prices to rise, even if business gets better. Plentiful supply will keep the stock price in check because it extinguishes the need for people to pay more for the shares since they are so readily available. So excess supply, coupled with the

cloudy outlook for J.D. Edwards and its industry, leaves analysts and fund managers with little reason to expect a rally in the stock anytime soon.

"I think they might still have a way to go with their business," says one Bay-area fund manager who doesn't own any shares but says he will keep an eye on the company for signs of a turnaround. "It's a good company, just in a rough time."

On Feb. 11, Crook also lowered his 12-month price target for the stock to 24 from 42 partly because of the overhang in the market. But concerns about future earnings and a tough-to-predict revenue flow prompted him to lower the price target again -- this time to 17, based on two times 12-month trailing revenue, which for the year ended Oct. 31, 1998, was $934 million. The stock closed Friday at 14 13/16, giving the Denver-based software concern a market cap of $1.53 billion.

"It's a high-risk opportunity," says Crook, who maintains an accumulate rating on the stock.