Portal Software Posts Unexpected Profit
By Cindy Christ

Shares in Portal Software bucked a broad market downtrend Friday, popping nearly 21 percent after reporting an unexpected first quarter profit on Thursday.

Based in Cupertino, Calif., Portal Software makes billing and customer management software for Internet service and infrastructure providers.

In its fiscal first quarter 2001, Portal's revenues totaled $50.6 million, up 234 percent from the same period last year.

Net income was $3.1 million, or 2 cents a share, versus a net loss of $5.5 million, or 4 cents, a year ago.

Analysts polled by First Call/Thomson Financial expected Portal to lose a penny in the first quarter.

Portal, which is among Merrill Lynch's top 10 technology picks for 2000, has beat analysts' estimates every quarter since going public last May.

"We won a record 47 new customers in the first quarter, which resulted in increasing our customer count by nearly 25 percent over the fourth quarter of fiscal 2000," said Portal's chief financial officer Jack Acosta, in a statement.

During the quarter, Portal expanded its business in the interactive cable, wireless Internet and application service provider (ASP) markets, the company said.

In the high-speed access segment, Portal forged alliances with Cisco Systems (CSCO), which owns a 4 percent stake in the company, and Motorola (MOT), and was chosen to provide billing services for leading broadband cable providers in Asia, Britain, Latin America and the United States.

Portal has made the wireless Internet another major focus of its sales efforts this year, recently launching partnerships with Motorola, Hewlett-Packard, Nokia, Sony, Inktomi and Cap Gemini. In addition, Portal handles the billing for the Palm VII, a version of the world's No. 1 handheld computer, and for radio Palm Pilot.

The company said application service providers (ASP), which rent software, also are becoming a bigger part of its business.

In the first quarter, Portal signed up more than 20 new ASP and Internet business services (IBS) clients and entered a strategic relationship with Microsoft to provide customer management and billing software to ASP and IBS businesses.

Experts estimate the market for Internet Protocol billing software will double every year to more than $5 billion by 2004.

Analysts polled by First Call project earnings growth of 57 percent per year over the next five years for Portal, and earnings per share of 1 cent for 2001 and 11 cents for 2002.

Following the company's strong showing, analysts were pounding the table for the software maker Friday.

Both Thomas Weisel and Chase H&Q reiterated "buy" ratings, and Credit Suisse First Boston restated a "strong buy" recommendation. On Wednesday, Merrill Lynch issued a "near- term accumulate" ranking ahead of Portal's earnings release.

Robertson Stephens Wireless Data analysts Marianne Wolk, who rates Portal a "buy," raised earnings estimates for the company to 7 cents from 1 cent in 2001 and to 22 cents from 5 cents for 2002.

"Portal reported record revenues of $50.6 million, ahead of our $41 million forecast," Wolk wrote in a research note.

"We believe the company's pipeline is significantly higher than last quarter, bolstered by ongoing additions to its global direct sales team. We continue to see substantial upside to Portal as it executes on its partner-led expansion strategy into new geographies and vertical data sectors," Wolk added.

Shares in Portal Software finished up $8.12, or 20.8 percent, at $47.12.