Prudential downgraded Micromuse (MUSE

) to neutral from overweight.

Analyst Michael Turtis says the downgrade of the business software company is based on a lackluster quarter. He notes the fourth-quarter revenue and earnings per share are in line with the consensus and the company's guidance. Still, although the backlog is up, Turtis says deferred revenue fell $5 million on recognition of a large deal, with an outlook for flat to just slightly up in the next quarter. Additionally, he notes license revenue were also weak, falling 10% sequentially, to $16.7 million.

Turtis says the revenue guidance for the first quarter is in line with the consensus at $34 million to $35 million, but below his $36 million estimate. He says the first-quarter earnings per share guidance of 3 cents to 4 cents (pro forma) is just below the consensus of 4 cents and below his previous estimate of 5 cents.