Autonomy shares drop amid margin concerns

Shares in Autonomy dropped yesterday after the software firm said that the costs of meeting demand for its new database search product had hit its gross margin in the third quarter.<br /><br />Autonomy &ndash; which makes software that searches e-mail, telephone calls and documents for government departments &ndash; posted revenue of $191.6m (&pound;116.4m) for the three months to the end of September and earnings per share of 20 cents, broadly in line with analysts&rsquo; expectations.<br /><br />But the company&rsquo;s gross margin fell to 86 per cent, from 92 per cent, which it said was due to higher-than-expected launch costs for its database product and did not signal a trend.<br /><br />&ldquo;We did a big product launch and had a set of one-off costs for that,&rdquo; said chief executive Mike Lynch.<br /><br />&ldquo;If you took that out the operating margin (34 per cent) would have been 43 per cent, which for Q3 is a record.&rdquo;<br /><br />Shares in the group have risen by 87 per cent in the past year.