$11-Million Loss, 60 Layoffs for Platinum

IRVINE —  Beset by persistent legal troubles and disappointing sales, Platinum Software Corp. laid off 60 employees Tuesday and reported an $11-million loss for its second quarter.

Platinum, which continues to be haunted by a 1993 bookkeeping scandal, also disclosed that it may have to take the unusual step of sweetening a $15-million stock deal made last year to settle a nettlesome shareholder lawsuit.

Last June, the company had issued $15 million in stock to shareholders who filed a suit against the company after Platinum admitted it had overstated revenue in 1992 and 1993 by $18 million.

But Platinum’s stock, which was trading as high as $16.875 per share last June, has fallen dramatically, closing at $4.75 per share Tuesday. After that prolonged tumble, those plaintiffs were no longer satisfied with last June’s settlement, said Carmelo Santoro, chief executive of Platinum.

As a result, Platinum is close to making an agreement to rescind the June stock deal and issue the shareholders debentures that can later be converted to cash or stock. Presumably, that would restore to shareholders much of the value of the original settlement.

Santoro said the company may not be obligated to restructure the deal, but is considering doing so to avoid a court battle.

“I thought we had this behind us, and I thought we played the game by the rules,” Santoro said. “However, I felt at this time we could not afford to be dealing with another lawsuit.”

That admission reflects the ongoing struggles at Platinum, which laid off 100 employees last fall as Santoro tried to cut costs amid declining sales of the company’s financial accounting software.

Tuesday’s second round of cuts, which sliced away 15% of Platinum’s work force, affected employees in various departments, including finance, sales, marketing and development. Santoro said the cuts were necessary to trim costs further because recent forecasts point to slower sales over the next few months than officials had previously expected.

In recent months, Platinum has cut expenses from roughly $17 million per quarter to $12 million per quarter, Santoro said.

He said the company has lost the confidence of many of its customers, who fret that Platinum’s steep losses threaten its existence. “We have little corporate credibility due to lack of profitability,” he said.

He added he hopes to return the company to profitability by summertime, but for now, Platinum remains awash in red ink.

Platinum’s second-quarter loss of $11 million, or 82 cents per share, contrasts with a loss of $2.85 million, or 22 cents per share, in the comparable period a year earlier. Sales in the fiscal period ended Dec. 31 plummeted 24% to $10.2 million from $13.3 million.

The loss in the latest quarter reflected a $5.6-million charge related to layoffs and the decision to no longer sell one of Platinum’s software products.

For the first six months of its fiscal year, Platinum reported a loss of $15.4 million, or $1.13 per share, compared to a loss of $2.8 million, or 22 cents per share, in the comparable period a year earlier. Six-month sales totaled $22.8 million, down 18% from $27.9 million a year earlier.