Breakaway Solutions Sinks on Q4 Warning

Breakaway Solutions, Inc. (Nasdaq: BWAY) fell 1/8 to 7/8 Friday after thecompany, which provides software and services that help companies dobusiness over the Internet, said fourth-quarter results will be belowanalysts’ expectations because of a sluggish market.

The Boston, Massachusetts-based company said revenue for the quarter will be US$22.5 millionto $24 million, up about 65 percent from the year-earlier quarter. Full-yearrevenue will be about 300 percent ahead of 1999, at $118 million to $119million, Breakaway said.

However, the company said it is looking for a loss before extraordinaryitems of 26 to 28 cents per share for the fourth quarter. The declinereflects a drop in business from Internet Capital Group companies, a”continuing change in the market environment” and a shift in focus away fromdot-com clients and toward brick-and-mortar companies with Internetoperations.

The company also announced additional layoffs, saying it will cut 30 percentof its staff, rather than the 10 percent originally announced. The job cuts,along with other cost reductions, will save about $10 million each quarterbeginning with the first quarter of this year, the company said.

“Like many in our sector, Breakaway Solutions has felt the impact of achanging marketplace, particularly a shift away from a reliance on dot-comrevenues,” said president and chief executive officer Gordon Brooks.”Unfortunately, these market changes have combined with Internet CapitalGroup’s reduction of its investments in its affiliate companies to make thisquarter particularly challenging.”

Internet Capital, an incubator for e-business companies, is restructuring itsholdings to focus on a few key businesses.

Analysts at First Analysis reportedly downgraded Breakaway to neutral fromaccumulate following Friday’s announcement.

Breakaway plans to report fourth-quarter results on February 16th.

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