Topsy Turvy Times for Opsware

Software vendor's Q2 revenues beat analyst expectations, but net loss widens

September 1, 2005

3 Min Read
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Software specialist Opsware Inc., which is trying to make its presence felt in the emerging data center automation market, beat revenue expectations with its second-quarter results. But with Opsware a year away from breakeven, the company's shares dropped 48 cents (10.32 percent) to $4.17 today (see Opsware Surpasses Guidance).

Opsware, which is only in its third year of selling software, posted revenues of $14.1 million, up 60 percent from the same period last year. This beat analysts estimates of $13.88 million.

On a GAAP basis, however, the company posted a net loss of $3.9 million, or 4 cents a share, although this included charges related to its acquisitions of Tangram Enterprise Solutions and Rendition Networks (see Opsware Acquires Tangram and Opsware Opens Its Wallet). These figures were worse than the same period last year, when Opsware reported a net loss of $800,000, or 1 cent per share, and were also below analysts’ estimates of 2 cents (see Opsware Reports Q2).

Overall, this represents another topsy-turvy financial quarter for Opsware, which is regarded as something of a trailblazer in the server automation space. However, the performance of Opsware’s stock has not always matched its technology story (see Topsy-Turvy Q1 For Opsware).

With businesses increasingly deploying complex Web-based applications, IT managers often need to tweak their data center kit to provide additional capacity. Reconfiguring each server individually is costly and time-consuming, hence the move towards software that can make these changes automatically.But Opsware is up against established vendors such as IBM Corp. (NYSE: IBM) and Veritas Software Corp. (Nasdaq: VRTS), not to mention privately held specialist vendors like BladeLogic Inc. (see Opsware vs IBM Battle Brews)

Ben Horowitz, Opsware CEO, admits that, as a relative newcomer, the company is still subject to a number of external pressures. “There will be some volatility in how people view the market, how they view us, and how the stock trades,” he said on a conference call last night.

Nonetheless, the CEO predicted that the company will reach breakeven in the second quarter of 2006 and reeled off a list of recent customer wins. Intriguingly, this included both “a large intelligence component of the [U.S.] federal government,” and the Church of Jesus Christ of Latter Day Saints.

Horowitz explained that there is also movement on the competitive front. Veritas, he said, is “certainly distracted by the [Symantec] merger.”

Boosted by the launch of its new “Darwin” server automation software, Opsware has also replaced a BladeLogic deployment at Time Warner Cable, according to the CEO (see Opsware Launches Next-Gen SAS). “We were able to get in and displace BladeLogic and get a nice piece of business."Horowitz, however, was coy about Opsware’s M&A aspirations, admitting that the company does not have any acquisitions planned at the moment. But, he added, “We are always looking at the market and seeing what is available.”

— James Rogers, Site Editor, Next-Gen Data Center Forum

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