Aided by an accounting change and cost-cutting, business software maker


(SY) - Get Report

turned a year-ago loss into a profit in the first quarter despite a drop in revenue, the company reported Thursday.

The company said earnings and revenue would increase slightly in the current quarter.

The news pleased Wall Street -- Sybase shares gained 77 cents, or 6.6%, to $12.35 in recent trading.

TheStreet Recommends

The Dublin, Calif., company posted revenue of $181.6 million, down from $211 million a year ago as war and ongoing economic worries weakened business in the final days of the March quarter. Earnings increased to $13 million, or 13 cents a share, compared with a loss of $116.4 million, or $1.14 a share in the year-ago quarter, according to generally accepted accounting principles. The company lost 10 cents a share in the fourth quarter of 2002.

Last year, a new accounting regulation required the company to write down about $140 million in goodwill and other assets of companies it had acquired over the years, pushing earnings into the red. Sybase, once a major provider of mainstream databases, now specializes in mobile and wireless databases for financial services, health care, government and other customers.

Excluding charges, earnings in the first quarter were 17 cents a share, in line with Wall Street's expectations, and revenue also met expectations. Excluding charges, Sybase earned 21 cents a share in the year-ago quarter.

The company generated $95.5 million in cash from operations, the most in the history of the 17-year-old company, CEO John Chen said in an interview. A year ago, Sybase generated $75 million in cash from operations. Cash on hand increased to $464.5 million, and Sybase remains free of debt. Earnings were helped by cuts in operational costs, including a savings of $30 million in real estate costs.

"I'm feeling bullish about our future," Chen said.

Business in government, both state and federal, and in health care was strong in the first quarter, Chen said, but "telco and financial services were terrible." Refreshingly, Chen didn't blame problems in those business segments on the war. "It was the economy," he said. "They're not spending money."

Looking forward, Sybase expects pro forma earnings in the June quarter to range from 18 cents to 22 cents, and revenue of $182 million to $190 million. Analysts polled by Thomson Financial/ First Call expect pro forma earnings of 22 cents on sales of $183 million. GAAP earnings, said Chen, will range from about 13 cents to 17 cents a share.