NetObjects, Inc. Announces Financial Results for Its Second Quarter of FY2001

Apr 26, 2001, 01:00 ET from NetObjects, Inc.

    REDWOOD CITY, Calif., April 26 /PRNewswire/ --
 NetObjects, Inc. (Nasdaq:   NETO), a leading provider of e-business solutions
 and services for the small business market, today announced financial results
 for its second quarter of fiscal 2001.
     The company reported revenues from continuing operations for the second
 quarter of fiscal 2001 of $1.6 million compared to revenues of $7.8 million
 for the same period last year.  Excluding non-cash charges for amortization of
 goodwill, stock based compensation, loss on impaired assets and terminated
 investments, restructuring costs, net loss from discontinued operations, and
 the net gain from the sale of the Enterprise division, the proforma net loss
 for the second quarter of fiscal 2001 was $7.0 million or $(0.22) per share,
 compared to a proforma net loss of $3.1 million or $(0.11) per share for the
 same period last year.
     Results for the second quarter of fiscal 2001, including non-cash charges
 for amortization of goodwill, stock based compensation, loss on impaired
 assets and terminated investments, restructuring costs, net loss from
 discontinued operations, and the net gain from the sale of the Enterprise
 division, were net profits of $3.5 million or $0.11 per share, compared to a
 net loss of $6.4 million or $(0.23) per share for the same period last year.
     "This was the second full quarter under our new business model," said
 Samir Arora, NetObjects chairman and chief executive officer. "We continued
 down the path to profitability by further reducing our operating expenses by
 21% over the previous quarter and 49% compared to the same period last year.
 We've focused on implementing operating efficiencies while still providing our
 partners and users with value-added products and services," continued Arora.
 "This quarter we launched NetObjects Fusion MX, and have received positive
 reviews both from our customers and the press, including a review from CNET,
 which praised NetObjects Fusion MX as a 'godsend for small businesses,'"
 concluded Arora.
 
     Recent highlights:
 
     -- The Company launched NetObjects Fusion MX.  This latest version of the
        award-winning Web site building solution offers users a more robust,
        but simplified way to build, manage and promote their online business.
        Additional enhancements provide more features to further partner
        distribution and subscription-based services fostering the relationship
        between partners and their small business customers, with the benefit
        of recurring revenue.
     -- NetObjects continued to expand its relationship with Dell, which agreed
        to preload and distribute the new NetObjects Fusion MX.  IBM, Lotus and
        Novell will also offer NetObjects Fusion MX to their customers.
     -- Mustek Pacific signed an agreement to bundle NetObjects Fusion with its
        scanner products for distribution throughout Taiwan, China, Korea and
        the United States.
     -- NetObjects announced the completion of the sale of its enterprise
        division to MERANT for $18 million in cash.
     -- NetObjects achieved one of its most significant milestones this quarter
        by having licensed more than 10 million copies of NetObjects Fusion for
        distribution since 1996, when the product was first introduced.
 
     About NetObjects
     NetObjects, Inc., an IBM subsidiary (NYSE:   IBM), is a leading provider of
 e-business solutions and services. More information about NetObjects and its
 products can be found at www.netobjects.com/aboutus.
 
     NOTE:  NetObjects and NetObjects Fusion are registered trademarks, and
 NetObjects Matrix, NetObjects Collage, NetObjects Authoring Server and GoBizGo
 are trademarks of NetObjects, Inc. All other brand and product names may be
 trademarks or registered trademarks of their respective companies.
 
     This press release may contain forward-looking statements within the
 meaning of the federal securities laws. Such statements can be identified by
 the words "believes," "anticipates," "plans," "expects," and similar
 expressions. These forward-looking statements include, without limitation,
 statements about the market opportunities for Web site building software and
 services, our strategy, and competition. These forward looking statements do
 not constitute assurances regarding our future operating results, including
 the operations of our online services business, cash flows, and financial
 condition. The market for online Web-based small business services is new and
 extremely competitive. Our success in this business will depend on many
 factors, including our ability, or the ability of our distribution partners,
 to attract substantial numbers of paying subscribers for these services. We
 cannot be assured of generating a significant amount of revenue or earning a
 profit from the sale or license of these services. Our actual results could
 differ materially from those expressed or implied by these forward-looking
 statements due to various factors, including the risk factors described in our
 Form 10-K, Form 10-Q and other periodic reports filed with the SEC pursuant to
 the Securities Exchange Act of 1934. We undertake no obligation to update
 publicly any of these forward-looking statements.
 
 
                         NETOBJECTS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands except per share data)
 
                                       3 Months Ended         6 Months Ended
                                     March 31,   March 31,  March 31, March 31,
                                        2001       2000       2001      2000
 
     Revenues:
          Software license fees,
           training and online
           revenue                     $1,317       $5,618    $2,557   $10,343
          Software license and
           service revenue from
           IBM                            287        2,171       560     3,293
 
               Total revenues           1,604        7,789     3,117    13,636
 
     Cost of revenues:
          Software licenses,
           training and online          2,271         (434)    4,455     1,667
          Global services                 520           --       800        --
 
               Total cost of revenues   2,791         (434)    5,255     1,667
 
     Gross profit                      (1,187)       8,223    (2,138)   11,969
 
     Operating expenses:
          Sales and marketing           2,889        7,940     6,484    12,637
          Research and development      1,858        2,508     4,527     5,098
          General and
           administrative               1,236        1,323     2,514     2,705
          Loss on impaired assets
           and terminated
           investments  (A)             1,791           --       2,705      --
          Amortization of goodwill      2,365        2,017     4,729     4,034
          Stock based compensation         93          144       209       350
 
               Total operating
                expenses               10,232       13,932    21,168    24,824
 
     Operating loss                   (11,419)      (5,709)  (23,306)  (12,855)
 
     Interest income                       34          268        84       631
 
     Loss from continuing
      operations                      (11,385)      (5,441)  (23,222)  (12,224)
 
     Income taxes                          12           12        24        24
 
     Net loss from continuing
      operations                     $(11,397)     $(5,453) $(23,246) $(12,248)
 
     Loss from operations of
      discontinued Enterprise
      division   (B)                     (225)        (993)   (2,797)   (1,906)
     Gain from sale of Enterprise
      division   (C)                   15,108           --    15,108        --
 
     Net profit (loss)                 $3,486      $(6,446) $(10,935) $(14,154)
 
     Basic net profit (loss) per
      share                             $0.11       $(0.23)   $(0.35)   $(0.52)
 
     Shares used to compute basic
      net profit per share             31,694       27,770    31,662    27,299
 
     Diluted net profit (loss) per
      share                             $0.11       $(0.23)   $(0.35)   $(0.52)
 
     Shares used to compute
      diluted net profit per share     31,795       27,770    31,662    27,299
 
     Basic and diluted net loss
      from continuing operations
      per share                        $(0.36)      $(0.20)   $(0.73)   $(0.45)
 
     Net loss excluding charges
      (D)                             $(6,978)     $(3,122) $(15,433)  $(7,694)
 
     Net loss per share excluding
      charges  (D)                     $(0.22)      $(0.11)   $(0.49)   $(0.28)
 
     (A) The loss on impaired assets and terminated investments includes the
         cost of writing-off $1.5 million notes receivable due to uncertain
         collectibility and expenses associated with terminated investments of
         $291 thousand; the periods ended March 31, 1999, include no such
         charges.
     (B) This adjustment reflects the net effect of removing the associated
         revenue and expenses of the Enterprise division pursuant to the sale
         of this division to Merant on February 18, 2001.
     (C) Net gain from sale of Enterprise division to Merant on
         February 18, 2001.
     (D) Net loss for the three-month period ended March 31, 2001, excluding
         the loss on impaired assets and terminated investments of
         $1.8 million, amortization of goodwill of $2.4 million, stock-based
         compensation of $93 thousand, restructuring costs of $170 thousand,
         loss from operations of the Enterprise division of $225 thousand, and
         the gain from the sale of the Enterprise division of $15.1 million;
         the three-month period ended March 31, 2000, excludes amortization of
         goodwill of $2.0 million, stock-based compensation of $144 thousand,
         and the loss from operations of the Enterprise division of
         $993 thousand; the six-month period ended March 31, 2001, excludes the
         loss on impaired assets and terminated investments of $2.7 million,
         amortization of goodwill of $4.7 million, stock-based compensation of
         $209 thousand, restructuring costs of $170 thousand, loss from
         operations of the Enterprise division of $2.8 million, and the gain
         from the sale of the Enterprise division of $15.1 million; the
         six-month period ended March 31, 2000, excludes amortization of
         goodwill of $4.0 million, stock-based compensation of $350 thousand,
         and the loss from operations of the Enterprise division of
         $1.9 million.
 
                         NETOBJECTS, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
 
 
 
 
                                                  March 31,       September 30,
                                                     2001              2000
 
     ASSETS
 
     Current assets:
          Cash and cash equivalents                  $9,359            $8,323
          Accounts receivable, net                    2,414             5,897
          Prepaid expenses and other
           current assets                             1,280             4,528
 
               Total current assets                  13,053            18,748
 
     Property and equipment, net                      1,998             2,700
     Goodwill and other assets                        7,371            11,166
 
     Total assets                                   $22,422           $32,614
 
 
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)
 
     Current liabilities:
          Accounts payable                           $1,695              $944
          Accrued compensation                          569             1,337
          Other accrued liabilities                   5,271             3,900
          Other deferred revenues                     1,746             2,434
          Current portion of capital lease
           obligations                                   18               168
 
               Total current liabilities              9,299             8,783
 
     Capital lease obligations, less
      current portion                                    --                57
 
               Total liabilities                      9,299             8,840
 
     Stockholders' equity (deficit)                 131,586           131,302
     Retained Deficit                              (118,463)         (107,528)
 
               Total stockholders' equity
                (deficit)                            13,123            23,774
 
 
     Total liabilities and stockholders'
      equity                                        $22,422           $32,614
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X25226724
 
 

SOURCE NetObjects, Inc.
    REDWOOD CITY, Calif., April 26 /PRNewswire/ --
 NetObjects, Inc. (Nasdaq:   NETO), a leading provider of e-business solutions
 and services for the small business market, today announced financial results
 for its second quarter of fiscal 2001.
     The company reported revenues from continuing operations for the second
 quarter of fiscal 2001 of $1.6 million compared to revenues of $7.8 million
 for the same period last year.  Excluding non-cash charges for amortization of
 goodwill, stock based compensation, loss on impaired assets and terminated
 investments, restructuring costs, net loss from discontinued operations, and
 the net gain from the sale of the Enterprise division, the proforma net loss
 for the second quarter of fiscal 2001 was $7.0 million or $(0.22) per share,
 compared to a proforma net loss of $3.1 million or $(0.11) per share for the
 same period last year.
     Results for the second quarter of fiscal 2001, including non-cash charges
 for amortization of goodwill, stock based compensation, loss on impaired
 assets and terminated investments, restructuring costs, net loss from
 discontinued operations, and the net gain from the sale of the Enterprise
 division, were net profits of $3.5 million or $0.11 per share, compared to a
 net loss of $6.4 million or $(0.23) per share for the same period last year.
     "This was the second full quarter under our new business model," said
 Samir Arora, NetObjects chairman and chief executive officer. "We continued
 down the path to profitability by further reducing our operating expenses by
 21% over the previous quarter and 49% compared to the same period last year.
 We've focused on implementing operating efficiencies while still providing our
 partners and users with value-added products and services," continued Arora.
 "This quarter we launched NetObjects Fusion MX, and have received positive
 reviews both from our customers and the press, including a review from CNET,
 which praised NetObjects Fusion MX as a 'godsend for small businesses,'"
 concluded Arora.
 
     Recent highlights:
 
     -- The Company launched NetObjects Fusion MX.  This latest version of the
        award-winning Web site building solution offers users a more robust,
        but simplified way to build, manage and promote their online business.
        Additional enhancements provide more features to further partner
        distribution and subscription-based services fostering the relationship
        between partners and their small business customers, with the benefit
        of recurring revenue.
     -- NetObjects continued to expand its relationship with Dell, which agreed
        to preload and distribute the new NetObjects Fusion MX.  IBM, Lotus and
        Novell will also offer NetObjects Fusion MX to their customers.
     -- Mustek Pacific signed an agreement to bundle NetObjects Fusion with its
        scanner products for distribution throughout Taiwan, China, Korea and
        the United States.
     -- NetObjects announced the completion of the sale of its enterprise
        division to MERANT for $18 million in cash.
     -- NetObjects achieved one of its most significant milestones this quarter
        by having licensed more than 10 million copies of NetObjects Fusion for
        distribution since 1996, when the product was first introduced.
 
     About NetObjects
     NetObjects, Inc., an IBM subsidiary (NYSE:   IBM), is a leading provider of
 e-business solutions and services. More information about NetObjects and its
 products can be found at www.netobjects.com/aboutus.
 
     NOTE:  NetObjects and NetObjects Fusion are registered trademarks, and
 NetObjects Matrix, NetObjects Collage, NetObjects Authoring Server and GoBizGo
 are trademarks of NetObjects, Inc. All other brand and product names may be
 trademarks or registered trademarks of their respective companies.
 
     This press release may contain forward-looking statements within the
 meaning of the federal securities laws. Such statements can be identified by
 the words "believes," "anticipates," "plans," "expects," and similar
 expressions. These forward-looking statements include, without limitation,
 statements about the market opportunities for Web site building software and
 services, our strategy, and competition. These forward looking statements do
 not constitute assurances regarding our future operating results, including
 the operations of our online services business, cash flows, and financial
 condition. The market for online Web-based small business services is new and
 extremely competitive. Our success in this business will depend on many
 factors, including our ability, or the ability of our distribution partners,
 to attract substantial numbers of paying subscribers for these services. We
 cannot be assured of generating a significant amount of revenue or earning a
 profit from the sale or license of these services. Our actual results could
 differ materially from those expressed or implied by these forward-looking
 statements due to various factors, including the risk factors described in our
 Form 10-K, Form 10-Q and other periodic reports filed with the SEC pursuant to
 the Securities Exchange Act of 1934. We undertake no obligation to update
 publicly any of these forward-looking statements.
 
 
                         NETOBJECTS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands except per share data)
 
                                       3 Months Ended         6 Months Ended
                                     March 31,   March 31,  March 31, March 31,
                                        2001       2000       2001      2000
 
     Revenues:
          Software license fees,
           training and online
           revenue                     $1,317       $5,618    $2,557   $10,343
          Software license and
           service revenue from
           IBM                            287        2,171       560     3,293
 
               Total revenues           1,604        7,789     3,117    13,636
 
     Cost of revenues:
          Software licenses,
           training and online          2,271         (434)    4,455     1,667
          Global services                 520           --       800        --
 
               Total cost of revenues   2,791         (434)    5,255     1,667
 
     Gross profit                      (1,187)       8,223    (2,138)   11,969
 
     Operating expenses:
          Sales and marketing           2,889        7,940     6,484    12,637
          Research and development      1,858        2,508     4,527     5,098
          General and
           administrative               1,236        1,323     2,514     2,705
          Loss on impaired assets
           and terminated
           investments  (A)             1,791           --       2,705      --
          Amortization of goodwill      2,365        2,017     4,729     4,034
          Stock based compensation         93          144       209       350
 
               Total operating
                expenses               10,232       13,932    21,168    24,824
 
     Operating loss                   (11,419)      (5,709)  (23,306)  (12,855)
 
     Interest income                       34          268        84       631
 
     Loss from continuing
      operations                      (11,385)      (5,441)  (23,222)  (12,224)
 
     Income taxes                          12           12        24        24
 
     Net loss from continuing
      operations                     $(11,397)     $(5,453) $(23,246) $(12,248)
 
     Loss from operations of
      discontinued Enterprise
      division   (B)                     (225)        (993)   (2,797)   (1,906)
     Gain from sale of Enterprise
      division   (C)                   15,108           --    15,108        --
 
     Net profit (loss)                 $3,486      $(6,446) $(10,935) $(14,154)
 
     Basic net profit (loss) per
      share                             $0.11       $(0.23)   $(0.35)   $(0.52)
 
     Shares used to compute basic
      net profit per share             31,694       27,770    31,662    27,299
 
     Diluted net profit (loss) per
      share                             $0.11       $(0.23)   $(0.35)   $(0.52)
 
     Shares used to compute
      diluted net profit per share     31,795       27,770    31,662    27,299
 
     Basic and diluted net loss
      from continuing operations
      per share                        $(0.36)      $(0.20)   $(0.73)   $(0.45)
 
     Net loss excluding charges
      (D)                             $(6,978)     $(3,122) $(15,433)  $(7,694)
 
     Net loss per share excluding
      charges  (D)                     $(0.22)      $(0.11)   $(0.49)   $(0.28)
 
     (A) The loss on impaired assets and terminated investments includes the
         cost of writing-off $1.5 million notes receivable due to uncertain
         collectibility and expenses associated with terminated investments of
         $291 thousand; the periods ended March 31, 1999, include no such
         charges.
     (B) This adjustment reflects the net effect of removing the associated
         revenue and expenses of the Enterprise division pursuant to the sale
         of this division to Merant on February 18, 2001.
     (C) Net gain from sale of Enterprise division to Merant on
         February 18, 2001.
     (D) Net loss for the three-month period ended March 31, 2001, excluding
         the loss on impaired assets and terminated investments of
         $1.8 million, amortization of goodwill of $2.4 million, stock-based
         compensation of $93 thousand, restructuring costs of $170 thousand,
         loss from operations of the Enterprise division of $225 thousand, and
         the gain from the sale of the Enterprise division of $15.1 million;
         the three-month period ended March 31, 2000, excludes amortization of
         goodwill of $2.0 million, stock-based compensation of $144 thousand,
         and the loss from operations of the Enterprise division of
         $993 thousand; the six-month period ended March 31, 2001, excludes the
         loss on impaired assets and terminated investments of $2.7 million,
         amortization of goodwill of $4.7 million, stock-based compensation of
         $209 thousand, restructuring costs of $170 thousand, loss from
         operations of the Enterprise division of $2.8 million, and the gain
         from the sale of the Enterprise division of $15.1 million; the
         six-month period ended March 31, 2000, excludes amortization of
         goodwill of $4.0 million, stock-based compensation of $350 thousand,
         and the loss from operations of the Enterprise division of
         $1.9 million.
 
                         NETOBJECTS, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
 
 
 
 
                                                  March 31,       September 30,
                                                     2001              2000
 
     ASSETS
 
     Current assets:
          Cash and cash equivalents                  $9,359            $8,323
          Accounts receivable, net                    2,414             5,897
          Prepaid expenses and other
           current assets                             1,280             4,528
 
               Total current assets                  13,053            18,748
 
     Property and equipment, net                      1,998             2,700
     Goodwill and other assets                        7,371            11,166
 
     Total assets                                   $22,422           $32,614
 
 
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)
 
     Current liabilities:
          Accounts payable                           $1,695              $944
          Accrued compensation                          569             1,337
          Other accrued liabilities                   5,271             3,900
          Other deferred revenues                     1,746             2,434
          Current portion of capital lease
           obligations                                   18               168
 
               Total current liabilities              9,299             8,783
 
     Capital lease obligations, less
      current portion                                    --                57
 
               Total liabilities                      9,299             8,840
 
     Stockholders' equity (deficit)                 131,586           131,302
     Retained Deficit                              (118,463)         (107,528)
 
               Total stockholders' equity
                (deficit)                            13,123            23,774
 
 
     Total liabilities and stockholders'
      equity                                        $22,422           $32,614
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X25226724
 
 SOURCE  NetObjects, Inc.