Inch by Inch

Mid-market CRM vendors Pivotal Corp. and Onyx Software Corp. are not in the black yet, but they are getting close. Pivotal just released its fourth quarter and fiscal 2002 financial results showing a sequential improvement in sales and a bottom line getting within a razor's edge to profitability. In fact, Pivotal posted a smaller loss than Wall Street was expecting for its fourth quarter as well as for its fiscal year. For the quarter ended June 30, Pivotal's pro forma loss was just $800,000, or 3 cents a share. This is an improvement from a pro forma loss of $6.5 million, or 27 cents per share, for its fourth quarter of fiscal 2001 and from the $1.8 million, or 7 cents a share loss, for its third quarter of 2002. These results also beat analysts' expectations of a loss of 4 cents per share for the just ended quarter, according Thomson Financial/First Call. Sales for the quarter improved to $19.1 million when compared with third quarter sales of $17.7 million. However, this is down from $22.2 million Pivotal logged in revenue for its fourth quarter last year. Along the same lines, license revenue rose to $8.8 million for its fourth quarter, higher than the $7.5 million in the previous quarter but also down from $12 million for the same time period last year. Pivotal Chief Executive Bo Manning says that 50 percent of its licensing revenue was from new accounts with 53 new customers. "If you look at our pipeline you will continue to see strength there," Manning says. "We feel pretty good about our ability grow and increase our market share despite the current economic conditions. For the year, Pivotal lost $21.4 million, or 89 cents, pre share, on a pro forma basis on sales of $69.6 million. This compares with a $5.8 million, or 25 cent per share loss on sales of $96.2 million for fiscal 2001. Manning says the company will turn the corner and be profitable in the second half of this calendar year. He sites that there are 45,000 mid-size businesses in the market and only 5,000 have adopted CRM. This coincides with a recent study by the Merrick School of Business stating that the mid-enterprise market represents 24 percent of total U.S. sales, 23 percent of employment and 25 percent of payroll. Also poised to capitalize on the mid-market growth is Onyx, which recently released its June quarter financials as well. Much like Pivotal, Onyx appears to be getting close to profitability, but is not as near as its CRM counterpart. For its second quarter ended June 30, Onyx lost $4.7 million, or 9 cents a share, on revenue of $18.5 million. This compares with a loss of $13.7 million, or 35 cents per share, on $29.8 million in revenue for the same quarter last year. Licensing revenue rose to $6.5 million from $3.1 million in the first quarter, but down from $11.8 million for its second quarter of fiscal 2001. "The sequential improvements in our second quarter license revenue was largely driven by customers who broadened their Onyx deployments with add-on license purchases that were, in some cases, several times larger than their original investments," said Brent Frei, chief executive of Onyx in a prepared statement.
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