Endace flags major slowdown in sales

Analyst forecasts revenues from financial services to 'decline dramatically'

New Zealand-based network technology developer Endace is not planning any cutbacks in the face of what it describes as a “major slowdown” in sales to the global financial services sector.

Endace issued a trading update to the London Stock Exchange last week saying the sales approval process was slowing and projecting revenue growth of 20%, well down on the 62% reported for its last half year, ended September 2008.

Shares tumbled 32% on the announcement and one analyst, Panmure Gordon, cut its rating on the stock from a “buy” to a “hold”.

Endace CEO Mike Riley said the analyst had effectively “inserted a pause” in its projections, but Endace is still growing and profitable.

“We’ve definitely seen a major slow-down, literally in the last couple of weeks,” he says. “There’s a certain momentum in how [financial services companies] behave and buy.”

Riley says the forecast was a disappointment but not a surprise given the state of the world economy. Approvals for investment now have to go higher in the corporate chain of command and are taking longer to emerge, he says.

Endace has no plans for cuts or redundancies, Riley says, but the pace of investment may slow over past years.

“It’s more about managing the pace of growth,” he says.

Riley travels to the UK next week to talk to customers and get a better feel for how the market is changing.

Panmure Gordon described its downgrade as “extremely conservative”.

"Given the uncertainty within these customers, we are taking an extremely conservative view and now forecast revenues from this segment to decline dramatically," the analyst wrote in a note.

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