Tough cable market tags Liberate’s first quarter returns

A weak cable business slammed interactive TV software vendor Liberate Technologies with worse-than-expected first quarter results, with the direct consequence of increased belt tightening and ongoing employee layoffs at the Seattle-based firm.

“The best thing one can say about the first quarter is that it’s over,” Liberate Chairman-CEO Mitchell Kertzman said during a conference call with analysts. “We’d all be hard pressed to find anything to be pleased about in these results.”

Although Liberate last month warned that things were going to be tough, the results stunned company executives.

“One of the things that’s most disappointing to us is that this is a company that had a track record of superb visibility and performance for the three years that we were a public company up until, particularly, this quarter,” said Kertzman, reiterating that Liberate continues to aim at profitability by the end of this fiscal year.

For the quarter, which ended Aug. 31, Liberate showed a loss of $249.6 million, or $2.35 per share, as opposed to year-ago losses of $78 million or 74 cents a share. First quarter revenue was $10.3 million, down 40.5% from $17.3 million a year ago.

On a pro forma basis, the company’s first quarter loss was $16.87 million, or 16 cents a share, and within the 12-to-19 cents it forecast last month. Pro forma revenue was $11.4 million, compared with a forecast of $12 million to $14 million and $18.3 million a year earlier.

Liberate, which sells digital cable TV middleware, recently acquired Sigma Systems Group and many of the layoffs that brought the company down to about 600 total employees took place there.

Kertzman, who said he is optimistic about a second quarter rebound based on a resurgence in European business and the development of U.S. deployments, pinned the loss strictly on the cable market.

“In no case here did the revenue fall short because of competitive issues,” he said. “There isn’t a case where we lost business that we expected to win. It wasn’t due to product delivery or shipment or product availability issues. It was primarily due to the market conditions that affect everybody in this market.

“There’s nobody selling into cable and telecom that’s not experiencing difficulties,” he said.