Micromuse Probe Will Delay Its Annual Report

Micromuse Inc., whose software detects failures in telephone networks, said Tuesday that it was delaying its 2003 annual report because of an internal accounting inquiry.

The probe, related mostly to expense recognition, probably will lead to a restatement of results for fiscal years 2000 through 2003, Chief Executive Lloyd Carney said during a conference call. The company’s fiscal year ends Sept. 30.

The inquiry will result in new costs of about $2 million in the first quarter ending today, San Francisco-based Micromuse said. It also backed away from a profit forecast.

“You just shouldn’t rely on previous guidance for earnings at this point,” Chief Financial Officer Michael Luetkemeyer said. He declined to elaborate.

The annual report was due Monday.

Shares of Micromuse fell 7 cents Tuesday to $6.83 in Nasdaq trading. They have risen 79% this year.

In October, Micromuse estimated a first-quarter profit, excluding certain costs, of 3 cents to 4 cents a share and net income of 1 cent to 2 cents a share.

Micromuse said Tuesday that first-quarter sales wouldn’t be hurt by the probe and raised its forecast, estimating that revenue would be at the high end of or would slightly exceed the $34 million to $35 million it had forecast Oct. 29.

The restatements will raise earnings in some periods and lower them in others, the company said.

The company had been expected to earn 4 cents a share on sales of $34.3 million in the first quarter, the average estimate of analysts surveyed by Thomson Financial.

In last year’s first quarter, Micromuse lost $7.3 million, or 10 cents a share, on sales of $27.1 million.

Micromuse reported a 2003 net loss of $4.1 million, or 5 cents a share, on sales of $125.4 million.

The inquiry began in September and should be done in the “next few months,” Carney said.

“Some of it occurred on my watch, so I take this very, very seriously,” said Luetkemeyer, who was Micromuse’s interim CEO from January to July. “I wish I had caught it.”