March 21, 1997 11:00 AM ET
Geoworks lowers revenue estimates, but ambitions stay high
By Renee Deger

  Loss-ridden Geoworks Inc. warned that more bad news is on the way.

The company, which develops operating systems for mobile phones and other devices, said that revenues would fall short of analysts' expectations during its fourth quarter ended March 31. In a statement issued after the close of the stock market on Thursday, Geoworks officials said the company has hopes of breaking even by the fourth quarter of fiscal 1998.

Geoworks shares closed up 3/8 at $12, roughly a 3 percent one-day increase, but off from its 52-week high of $46 1/4.

The company, based in Alameda, Calif., said revenues would range between $1.8 million and $2.2 million for the quarter.

Geoworks officials blamed the company's shortfall on what they described as a more conservative way of estimating revenue as well as a delay in recognizing nonrecurring engineering fees.

Despite the apparently gloomy news for investors, the investment banker who championed Geoworks' entrance into the public market in summer 1994, in a sluggish stock market, was still upbeat about the company's longer-term prospects.

"They're going to take their turn in the barrel," said Cristina Morgan, a managing director at Hambrecht & Quist L.L.C., in San Francisco.

Any company making such an announcement is going to take a hit, she said, but the short-term loss is insignificant when compared to the potential of the market tapping Geoworks' operating system, GEOS. She noted that the company receives a royalty payment for every cellular phone or other communications device loaded with its software.

"The reason to own Geoworks [stock] is because the market for the class of devices that Geoworks is targeting will be huge," Morgan said.

Indeed, Deborah Dawson, Geoworks' vice president of marketing, said the market for so-called smart phones, which can handle both voice and data, is just beginning to bloom.

The company recently announced plans to license its operating system to Toshiba Corp.'s Genio PCV100 Pocket Communicator, a smart phone. Sales of another licensee, Nokia Group's Nokia 9000, were moving along briskly and Geoworks anticipates breaking even in the next 12 months, Dawson said.

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