) to neutral from outperform.
Analyst Steven Ashley said the shortfall is due to delays in closing large deals and continuing sales reorganization in Europe. He says it was more disconcerting that: 1) management is saying they were cautious about the fourth quarter; 2) no other software companies have (yet) pre-released third quarter shortfall; and 3) a previously disclosed informal inquiry from the Securities and Exchange Commission is now a formal investigation.
The downgrade is based on uncertainty surrounding timing on ongoing Europe, Middle East, and Africa (EMEA) field reorganization, the formal nature of the Securities and Exchange Commission investigation, and management's cautious tone for the fourth quarter.
The analyst cut his $1.48 2005 earnings per share estimate to $1.45, his $1.75 2006 estimate to $1.65, and his $45 target to $41.