FalconStor Software today issued a press release saying it will miss its previous revenue estimates for the year, due to a bad third quarter. FalconStor’s new estimate for the quarter that ended Sept. 30 is a range of between $19 million and $19.5 million, in contrast with Wall Street’s $22.78 million consensus.
FalconStor also lowered its guidance for the full-year revenue to between $85 and $87 million, as opposed to its earlier projections of $100 to $104 million. In a statement, CEO ReiJane Huai blamed the wider economy for the shortfall:
“The difficult economic conditions at the end of the third quarter resulted in many companies freezing or lowering their information technology spending, which caused our revenues for the quarter to fall short of our projections. We remain confident in the capabilities of our products. But given the continuing difficult global economic conditions, we are projecting that revenues for the fourth quarter will also be below our previous expectations.”
“They have a much smaller margin of error,” Enterprise Strategy Group analyst Brian Babineau said of FalconStor. “A couple of deals don’t get done and they miss because we are only talking about $20 million a quarter in revenue.” FalconStor declined comment on whether any particular product line or individual product had been most affected by this miss. The company will report its earnings Oct. 28.
Analysts, investors and perhaps customers will watch closely over the next few weeks when storage companies report earnings, with guidance for this quarter and next year of particular interest. In a recent BusinessWeek interview, NetApp CEO Dan Warmenhoven said his company will also miss its revenue growth projection for the year. Worries in the market about IBM due to its financing business were assuaged somewhat by the pre-announcement of a 20% earnings increase for the company and a reaffirmation of its revenue targets for the year last week.
“I think most companies would have preannounced [shortfalls] already,” Babineau said. “I do not expect any [more] third quarter pre-announcements, however, I do expect some very conservative gudiance and commentary for all IT in regards to the calendar-year fourth quarter.”