FileNet

( FILE) boosted first-quarter revenue by nearly 9% year over year, but charges for stock-based compensation pushed net income down by 12%.

Earnings guidance for the second quarter was below expectations and in recent trading shares were off 36 cents, or 1.2%, to $28.83.

The software company earned a first-quarter profit of $7.6 million, or 18 cents a share, compared with $8.3 million, or 20 cents a share, in the same quarter of 2005. Total revenue increased to $108.9 million from $100 million, while software revenue was up more than 16% to $44.9 million, the company announced early Wednesday.

Charges for stock-based compensation, which most companies are now required to report under new accounting rules, cost the company $2.4 million; without them, FileNet would have earned $10.1 million, or 23 cents a share.

On that basis, the company beat the First Call consensus by 2 cents; analysts were expecting sales of $106 million.

Looking to the second quarter, the company told investors to expect a profit of approximately 23 cents a share (excluding charges for options) on revenue of $111 million, including $46 million in software revenue. Wall Street was looking for a 25-cent-a-share profit on sales of just over $111 million.

CEO Lee Roberts said in an interview that "we have strong momentum going into the second quarter and have already closed an $8.3 million deal."

FileNet sells content management software and faces competition from two much larger players --

IBM

(IBM) - Get Report

and

EMC

(EMC)

, which now owns Documentum, -- as well as a number of pure-play content management companies such as

OpenText

(OTEX) - Get Report

.

The space has consolidated rapidly, said Roberts, who noted that at the height of the dot-com era there were about 100 players -- now there are just eight, "and only three that really count -- IBM, EMC and us."

For the full year, the company raised guidance by a nickel to $1.05 a share, on total sales of $450 million, including $185 million in software revenue. Analysts were projecting a profit of $1.03 a share on sales of $450 million.