Informatica edges higher following Thursday plunge

NEW YORK -- Shares of business software maker Informatica Corp. made a small rebound Friday after losing more than 20 percent of their value a day earlier following the company's disappointing third-quarter forecast.

THE SPARK: On Thursday, Informatica forecast a smaller profit and less revenue than analysts had expected. The company said its adjusted net income will be between 25 and 27 cents per share, well below the 33 cents analysts had projected. Revenue was estimated at $189 million to $191 million, compared with analyst estimates of $199.2 million.

THE BIG PICTURE: The Redwood City, Calif., company said its business in Europe fell short of expectations during the quarter and said it is taking steps to deal with the results.

Informatica also forecast disappointing second-quarter results in July, saying corporate decision makers were cautious about making major technology purchases. That was particularly true in Europe as the continent dealt with a weak economy and concerns about the debt crises in Greece and Spain.

THE ANALYSIS: Wedbush analyst Steve Koenig kept an "Outperform" or "Buy" rating on the stock, but lowered his price target to $31 per share from $40. He said broader economic problems were largely responsible for Informatica's problems.

"We continue to believe that a deteriorating global macro environment is the root cause of Informatica's difficulties, exacerbated by the company's execution difficulties," he wrote.

Nomura analyst Rick Sherlund went a step further and upgraded his rating to "Buy" from "Neutral," citing recent personnel changes and new product offerings.

"We think the sales force issues will ultimately get resolved with the new global head of field operations, John McGee, accountable for results staring on Oct 1 who has a solid reputation for execution," he said in a note to clients. He also pointed to expansion into a new comprehensive data integration platform, which should enable Informatica to return to strong growth in licensing. But, he said, changes will likely take several quarters. He cut his price target to $33 from $38.

SHARE ACTION: Shares of Informatica picked up $1.10 or 4.2 percent, to $27.14 in afternoon trading. The stock sank 22.6 percent on Thursday and is down 40 percent since early July.