Autonomy shares rocked by cut in profits forecast

City A.M. Reporter
software firm Autonomy said it would cut its full-year revenue guidance by about three per cent after weaker-than-expected demand, sending its stock sharply lower.

Shares in the group, whose meaning-based search software is used by multinationals and governments, plunged as much as 21 per cent to an eight-month low of 1,464p, the largest FTSE 100 faller, after a trading update yesterday.

The stock closed at 1,551p, a fall of 16 per cent.

Autonomy said it expected full-year revenue growth of about 17 per cent and said its third quarter would meet but not beat its own expectations. Analysts had pencilled in full-year growth of about 21 per cent, according to a Thomson Reuters poll.

Chief executive Mike Lynch blamed customer volatility due to the current macroeconomic situation for a cut in the company’s revenue forecast of three per cent.

Analyst Bob Liao at Canaccord Genuity, who rates the firm a “hold”, said Autonomy was expected to rebound after one-off events clouded the second quarter, when the group’s margin slipped.

“Things have not been coming together as expected,” he said. “It throws into question its longer-term growth potential. I’m guessing the downgrade to consensus will be somewhere in the neighbourhood of six per cent in terms of earnings, and that will extrapolate into 2011 in a higher percentage downgrade.”

Goldman Sachs removed the company from its “conviction buy” list, but retained its “buy” rating, saying it believed the stock would be in the “penalty box” in the short to medium term.

“Apart from M&A support and prospects of an accretive acquisition, we believe predictability of growth has become more uncertain in the short term,” Goldman said.