vignette

Vignette (VIGN) 29 7/16 -4 15/16: VIGN shares are getting hit before this afternoon's Q3 earnings release. Concern about rising DSO continues to make the rounds on trading floors after last quarter's rising DSO level (over 120 days) was cited for much of the stock's decline. Last quarter's rise in DSO can be attributed in part to the company's conservative revenue recognition policy by which sales are only recognized upon successful implementation of the software. Implementation takes several months, so although Vignette may have already signed a contract and received payment 30-45 days later, they won't pencil in the revenue until two or three months after the contract is inked, therefore DSO is more erratic than industry averages. Last quarter, the company signed their biggest deal to date right before the quarter close, a $10 mln Terra Networks agreement. The deal showed up in A/R, but wasn't recognized as revenue until Q3 (instead shows up as deferred revenue under current liabilities in Q2). This conservative accounting is not the standard in software, where most companies will recognize revenue upon delivery. Since DSO does not account for deferred revenue, VIGN's DSO appear artificially higher than competitors. Anyway, word from the analysts is that Q3 will see DSOs return to a more normal level in the 80-85 days area. Because the revenue stream is so lumpy, estimates vary widely. Bigger deals take longer to implement and therefore, longer to show up on the top line. The Street doesn't like the choppiness from quarter to quarter, but conservative accounting is no reason to punish a stock. That said, look for VIGN to meet or beat their ($0.01) consensus EPS estimate with any upside marking the company's third straight profitable quarter. Revenue estimates are hard to come by and vary widely, but we would consider anything north of $120 mln a very successful quarter and anything south of $105 mln a disappointment. Just as important (some would argue more important), is the backlog; last quarter's level was $75.5 mln. The company continues to chalk up impressive deals and gain inroads to new clients through strategic agreements with such heavyweights as IBM and Intel. Last quarter's backlog provides good visibility into a strong Q3. - Matt Gould, Briefing.com

Entertainment: Blockbuster Inc., Bonnier Media, HBC Interactive, TV New Zealand, Voxstar

Retail: BigVine, Home Interior and Gifts, Homeportfolio Inc., Buy.com

The Company also recognized significant orders from existing customers including 4anything.com, Bank of Montreal, Bertelsmann Springer, CSC Holdings, Deutsche Telekom, Fidelity Investments, Hewlett Packard Europe, Hoover`s, Lucent, Lufthansa, Manulife, Premium TV, Primedia Magazine, Sitestuff, and Sonera.

Strategic Partners
In the quarter, Vignette announced several significant partnerships. On August 3, 2000, Vignette announced a global strategic eBusiness alliance with IBM. As part of the alliance, both companies are committed to integrating Vignette`s V/5 with IBM`s Websphere Commerce Suite and Websphere Application Server, with dedicated development and support personnel to the integration effort. In addition, Vignette and IBM have committed to joint sales and marketing efforts. IBM Global Services has committed to develop a worldwide services practice focused on Vignette products. The alliance has been successful for both IBM and Vignette from its inception with joint customer wins at Bank of Montreal, Bank of Nova Scotia, engineering.com, Manulife and Catapulse Networks.

On August 10, 2000, Vignette announced an expanded alliance with Sun Microsystems. Vignette was elevated to Sun`s Tier 1 partner status, their highest partner ranking, and both companies have committed to joint sales, marketing and engineering efforts.

In addition, Sun`s applications group will manage the relationship. Vignette, Sun and Artesia launched a new media and entertainment solution stack, and have seen sales opportunities being driven by this product. The solution stack is available at Sun`s iForce Ready Centers throughout the world.

The Vignette® Economy
During the quarter, the Company grew the Vignette Economy by adding a record 455 Vignette-trained third-party partner professionals, bringing the total to 1,800. Vignette expanded relationships with Andersen Consulting, Arthur Andersen, IBM Global Services, Inforte, Sapient and Sun Microsystems. Joint customer wins with partners in the Economy include Autoleasecheck.com, CSC Holdings, Impress Corporation, Harcourt Inc., JP Morgan, Merrill Lynch, PeopleNews, Primedia Magazine, Sportal Asia, and Time Out Communications, to name a few.

Vignette announced that companies such as AskJeeves, Inktomi, Motive Communications, Plumtree and Synchrony are building applications on the Vignette Application Foundation (VAF).