Earnings rose 15 percent at software maker Sybase Inc. in the second quarter, surpassing analyst expectations even as sales declined.
The company said it kept profits in line by slashing expenses, including 150 jobs, and cutting more conservative deals with customers, thus boosting margins. The moves were necessary because corporate technology departments are spending less, leading to a 13 percent revenue drop at Sybase.
"This quarter was extremely, extremely difficult in terms of the IT spending environment," CEO John Chen said during a conference call with stock analysts. "Customers continued to defer purchase decisions and reduce capital outlays."
Dublin-based Sybase earned 26 cents per share, or $25.9 million, in the quarter, compared with 24 cents per share, or $22.6 million, in the same period last year. Analysts expected the company to earn 24 cents per share, down from 25 cents per share before Sybase slashed its revenue forecast earlier this month.
Including special charges for stock compensation expenses and restructuring, the company earned $20.2 million, compared with a loss of $39.5 million in the same period last year.
During the third and fourth quarters, Chen said he expects sales to climb three to five percent, largely on the strength of Sybase's growing sales to the federal government. Earnings for the two quarters should be 60 cents per share, excluding special items, he said.
"Sybase reported a very good quarter in light of what's going on in the enterprise software space, especially in IT spending," said Gary Abbott, an analyst at RTX Securities. "I think it attests to their ability to manage the bottom line."
Chen plans to grow Sybase's sales force from about 650 people to 800 or 850 people. That will add to the company's expenses, but Chen said in an interview he hopes it will eventually grow sales, particularly in international markets. Sybase will hire about 40 people in China alone.
"We have been there for a very long time and have a good reputation inside the government," he said.
Sybase announced a deal Thursday to link 30,000 gas stations in China in a wireless system for processing debit card payments. Under the deal, Sybase will provide database, payment processing and sales software.
"Unlike some of our competitors, who have been cutting back their investment in Asia, we will continue to add more feet on the street there in terms of both sales and technical staff," Chen said during the conference call.
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