Irvine’s Continuus Slumps in 1st Full Day of Trading

Continuus Software Corp. turned in a lackluster performance in its first full day of trading Friday, as the Irvine software developer’s stock fell below the price of its initial public offering on the Nasdaq national market.

Continuus, which makes software tools that allow companies to manage their Internet programs and develop Web sites, raised about $20 million late Thursday afternoon when it sold more than 2.52 million shares at $8 a share.

But by Friday, concern over the company’s future growth pushed the stock down to $7.75 in midday trading. Continuus closed at $7.88, down 13 cents. The company has 172 full-time employees, most of them based in Orange County.

Three former executives sold shares in the offering. Former President Fred B. Cox, who is chairman of Emulex Corp. and a Continuus director, sold 225,000 shares, grossing $1.8 million. Former Chief Executive Sol Zechter, also a director, sold 163,195, garnering $1.3 million. John J. Kaskey, former chief financial officer, sold 13,200, grossing $105,600. None of the company’s officers sold shares in the offering.

Continuus said it hasn’t turned a profit in several years and had a net loss of almost $3.9 million in 1998 on sales of $27.4 million, according to regulatory filings. The company expects to lose money for “the foreseeable future,” the filing stated.

“If this company wants to survive, it’s going to have to completely change its business model,” said Manish Shah, founder of the investment research publication IPOMaven.Com. “If more and more companies are moving their software assets over to the Web, what is the point of using the services and products of a company like Continuus?”

Programmers use Continuus’ tools to install business management software on a company’s in-house computer systems. These applications allow employees to exchange text, graphics or other information--an order form, for instance--that otherwise would be exchanged on paper. Companies also use Continuus’ software to help develop e-commerce applications.

But the trend among corporations is to roll such applications out onto the Internet, rather than store them on their internal systems. The reason, say analysts, is that it helps companies save money and stay flexible while still connecting their workers, suppliers and customers together in an electronic world.

“We’re in a global economy, and people need to be able to access their databases anywhere in the world. The Internet lets them do that. Continuus’ service doesn’t,” Shah said. “But they are doing some work in e-commerce. If they decide to reposition themselves as an e-commerce application provider, this could be a completely different story.”