Drop in demand prompts Viasoft to cull employees

Viasoft has been forced to issue a first-quarter profits warning and will axe 10 per cent of its staff because of dwindling demand for year 2000 products.

The company, which started out 15 years ago as a mainframe maintenance organisation, moved into the millennium tools space in 1995 to cash in on demand among its Fortune 5000 customer base. It is concentrating on its core business and expanding its product lines.

Mark Schonau, Viasoft's chief financial officer, said: 'The large Global 5000 are not done with the year 2000 process, but they're well into it, so there's been a bit of revenue fall-off. We'll continue selling testing tools, but not as much as we used to. The year 2000 helped us to grow quickly over the past couple of years and with the money we made, we're now expanding our product lines and going back to mainframe maintenance and renovation.'

Viasoft is also expanding its services organisation and introducing a consultancy-based sales model. 'In the past, we mistakenly didn't push services and sold short-term solutions rather than helping customers to fix their problems,' Schonau said.

As a result of these moves, Viasoft hopes to return to profit next quarter.

For the first quarter ended 30 September, however, it is forecasting sales of between $24.2 million and 25.3 million, down from $26.1 million for the same period last year. Losses are expected to come in at between $0.04 and $0.08 per share, not including one-off charges, compared to profits last year of $0.20 per share.

Analysts had previously expected sales of $30 million and profit of $0.21. Taking into account one-off charges, Viasoft is making a loss of between $0.37 and $0.41.