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Technology Stocks : divine interVentures, Inc. (DVIN)

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To: Glenn Petersen who wrote (216)7/31/2002 5:20:56 PM
From: stockman_scott  Read Replies (4) of 246
Divine delays profit expectations

By Kay Riley
Crain’s Chicago Business
July 31, 2002

Divine Inc. pushed back the timeline for making its first-ever profit to the first quarter of 2003, as it reported a second-quarter loss. Previously, the company expected to make it into the black by fourth-quarter 2002.

The Chicago-based Internet consultancy and software firm late Tuesday posted a net loss of $51.2 million, or $2.74 per share, compared with a loss of $38.6 million, or $6.67 per share in the year-ago quarter.

At the same time, revenues—fueled by a spate of acquisitions—jumped to $163.6 million compared with $61.3 million in the second quarter 2001.

In a statement, CEO Andrew “Flip” Filipowski acknowledged that Divine is operating in "an extremely challenging economic climate and one of the worst technology recessions," but said he remains optimistic.

The company said it would continue cost-cutting measures. Divine has eliminated $85 million in annual expenses since the beginning of the year—including a significant number of job cuts—and it plans to slash another $25 million in expenses in the current quarter, Chief Financial Officer Michael Cullinane said in a statement. Details of those cuts were not available.

Divine also is looking to complete its acquisitions of Boston-based tech consultancy Viant Corp. and Canadian e-mail services company Delano Technology Corp. Once those deals close and the company finalizes a second round of financing from Oak Investment Partners, Divine expects its cash balance to increase to about $100 million, from the $55 million it had at the end of the second quarter, Mr. Cullinane said.

However, a sharp drop in Divine shares, which were trading at $2.67 on Wednesday, down from about $5 in May, has forced the company to revise its financing deal with Oak Investment Partners.

Instead of paying $6 per share for Divine preferred stock, as Oak did with the first, $22.9-million, round of its $61.6-million investment, Palo Alto, Calif.-based Oak will purchase its second round of preferred stock at market rates. That means that unless Divine’s stock shoots back to $5 or so, Oak will be getting a larger stake of Divine for its remaining $38.6-million investment. Oak's preferred shares can be converted to common.
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