Vignette Corp. Q3 2008 Earnings Call Transcript

| About: Vignette Corp (VIGN)

Vignette Corp. (VIGN) Q3 2008 Earnings Call October 30, 2008 5:00 PM ET


Jennifer Baker - IR Manager

Mike Aviles - President and CEO

Pat Kelly - CFO

Somesh Singh - SVP, R&D and Technical Operations


Analyst for Nathan Schneiderman - Roth Capital Partners

Mark Schappel - Benchmark Company


Good afternoon. My name is Karen and I will be your conference operator today. At this time, I would like to welcome everyone to the Vignette Q3 2008 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Ms. Baker, you may begin your conference.

Jennifer Baker

Thanks, Karen. Good afternoon and welcome to Vignette's third quarter 2008 financial results conference call. I am joined today by Mike Aviles, President and CEO; Pat Kelly, our Chief Financial Officer; and Dave Dutch, Senior Vice President, Products and Marketing. I will begin today by reading our required risk disclosure statement.

Our comments today may include forward-looking statements related to Vignette that involve risk and uncertainties including but not limited to quarterly fluctuations and results, management of growth, market acceptance of certain products, integration of acquisitions, general economic conditions and other risks. These risks are discussed in the Company's Form 10-K, and in our quarterly reports filed from time to time with the Securities and Exchange Commission. Please be cautioned the forward-looking statements are not guarantees of future performance and actual results may differ materially from management's expectations.

In addition, unfavorable changes in economic conditions may affect the Company's current expectations. Furthermore, our discussion includes certain non-GAAP financial measures in an effort to provide additional financial information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. Such reconciliation is included with our results and is in our earnings press release available on our website as well as in the Form 8-K filed with the SEC.

I will now turn the call over to Mike.

Mike Aviles

Thank you, Jennifer, and thank you all for joining our call today. I would like to make a few brief comments around the progress we have made during the quarter and our approach as we move into Q4 and fiscal '09. I will then turn the call over to our head of Products and Marketing, Dave Dutch who will discuss some of the focus innovation and customers' successes that would drive Vignette into the future.

Key points you should pick up from today's call. One, the Vignette continues to invest and innovate. Two, we are strengthening our overall go-to-market and our vertical focus. Three, we continue to make great progress with our customers and we are getting excellent recognition from industry analyst. Four, we have the right focus and we are investing for the long term growth of our business and lastly five, we have the financial strength to withstand and invest through a tough economic environment.

Let me turn to the quarter. Business is soft during the quarter as the market uncertainty we saw during the first half continued into Q3. We have also not been able to execute consistently across our various geographical markets. For example, North America's performance rebounded during Q3 versus prior quarters and was up significantly versus last year. However, international was down and disappointing versus last year and prior quarters. This is an indication of the volatility and the lumpiness of our business on a quarter to quarter basis.

Despite these challenges, we were able to deliver another quarter of non GAAP profitability. We also delivered EPS within guidance. We won some terrific new customers in very competitive situations; five of our top six deals were with new customers. One great example is Health Management Associates. HMA owns 58 hospitals and 320 clinics in the Southeast United States. They tried using IBM, Microsoft and open source solutions previously and had multiple problems. They have 36,000 employees and 8,000 physicians and they wanted a portal in every hospital.

They decided on Vignette for VCM content management portal and collaboration. That is just one of many good customers' success stories that you will hear about today as Dave follows me. We also showed tangible progress in many other areas during the quarter. More new products came to market including Vignette Media, a digital publishing platform for the Telco-media and entertainment market and Vignette Community Applications, an enterprise class social media solution.

We saw increased focused around the [I&W] business as evidenced by more dedicated sales and marketing resources and a new product in the market called Case Manager. Case Manager serves as a single, integrated platform for managing business processes and the associated customer interaction. It allows organizations to automate and track important customer transactions such as mortgage applications and income tax forms. Another area of progress was the continued recognition we get from industry analyst. For example, in the Gardner ECM Magic Quadrant published in September of '08, Gardner wrote, "Vignette has a strong platform and a vision for customer engagement."

Vignette has a large base of blue chip customers and can cite many success stories in supporting the design and development of engaging customer sites. Also, in the Gardner portal Magic Quadrant released that same month, Gardner wrote, "Vignette offers a strong, tightly integrated product. Vignette portal has proven scalability and is a foundation for numerous customers' high demand [BDC portals.]"

We are also coming of a very successful Vignette Village which is our annual customer conference. It was a very well attended event to our customers and partners from around the globe. Feedback from customers and industry analysts was very positive with a high level of interest in our product initiatives. It was also clear that our partner community is being reenergized.

Now, as we move forward into Q4 and fiscal '09, we will be taking a cautious approach. The broader economic environment is likely to have an impact on IT spending. We will be cautious in our planning and prudent in our investing going into Q4 and into fiscal '09. As you know, and as Pat will address later, we took some action during the quarter to rationalize investment and reduce cost. These actions resulted in approximately $2.6 million of special charges in Q3. We will also look closely at cost going into '09 with the focus on cost containment as opposed to cost cuts.

There is plenty of economic uncertainty right now but the market opportunity is clearly there for us. We compete in large growing and attractive markets. We are financially solid with room to invest and growth. There is clearly an opportunity for us to grow market share. As a result, we will continue to take a long term view on building our business and we will focus on the factors inside our control. We will continue to invest in our customers and invest in our products. We have a leading edge technology, an impressive customer base, and some terrific organizational talent.

Year-to-date, our R&D investments are up 12% versus last year resulting in over a dozen product releases since the beginning of the year with more to follow. We continue to bring powerful solutions to market that are proven and tested over time. The Vignette platform is rich, it is social, it is personal and it is multi channel. It is also fast, flexible, scalable and reliable. We have the best of class solution in the marketplace that has been tested and proven overtime.

We will also remain focused around key sales and marketing initiatives such as enabling the sales team through stronger product marketing and training on new and existing products, building our pipeline through field sales and field marketing. We will continue to run campaigns around our new products. We will also continue to focus on developing the partner channel. The partner community is coming together and as I said earlier, they are reenergized about the opportunity with Vignette. However it still remains one of the greatest leverage points for our organization.

So despite the market challenges, Vignette has the financial strength and the balance sheet to withstand and invest through a tough economic environment. This is a tremendous source of strength for our customers, our partners and our shareholders. We are also in a better position today to pursue growth through acquisitions. Our balance sheet, our cash position and the operational foundation we are building has put us in that stronger position. Our cash position puts us in a very unique position during this economic environment so we will continue to assertively look into opportunities where we can build on core markets and expand into adjacent markets, where we can add offerings that better engage customers and enhance the online experience. We will also be mindful of opportunities to acquire at attractive valuations, companies that expand to geographical or vertical market reach of our solutions.

With that, I would like to turn the call over to Dave Dutch, our new Head of Products and Marketing to talk about some focus innovation and customer successes. Dave?

Dave Dutch

Alright, thanks Mike. I appreciate it. It is a pleasure to be here today and this is a couple of days away from my six month anniversary and I was excited when I started on day one but the reality is I am even more jazzed today than I was when I started and I would like to share a couple of thoughts here why that is.

First of all, the Company itself, Vignette. Mike talked about it, powerful solutions, well regarded in the industry and they make a difference in a way businesses operate and interact with their end users. On top of that, you have an established and trusted brand name and a global thought leader when you say Vignette. What worked in that scores is when you are running products and marketing and coming in and having a name already made brand name like that. The employees as I have come to know them are both pioneers and innovators and that is a really unique mix. It is hard to find that people have been there and done that but they can also still be leading the industry with new solutions.

Mike also spoke about the market opportunity. It is very attractive. It is growing. It is changing the way businesses do businesses and it is changing people's lives. Also, I am at a software company with no debt and willingness to invest in the future which is no trivial matter given the markets right now, and lastly what it is all about is customers and we have some of the world's greatest brands that trust their business with Vignette. So, I cannot imagine where else I would rather be than bringing contents to life with Vignette.

I would like to talk about three themes within product and marketing and that is true for Q3 and going forward. The first theme I will address is customer success. We assess what really gets the Vignette team energized, makes us proud, ultimately it creates value book for the customers and for Vignette. They are number one priority of Vignette and without them, we do not exist. The second theme I will talk about is innovation. Innovation is the fuel of growth. In proving current solutions while launching industry leading new solution so it helps us grow current customers and add new ones. And lastly, focus. We have to set a clear direction for products and marketing and products and marketing has to set a clear direction for the Company. This is how things get done and I am confident this is in place now.

So, the first thing I will talk about that first theme was customers' successes and this is where it all comes together. Customer is using Vignette technology to run mission credit clarifications creating business value and leading their respected industries. What was great is when it is not me saying that; it is when it is the industry, the award, saying that. First award I would like to talk about is the Web Marketing Association 2008 Web Excellence Awards. These are awards that named the best websites in 96 different industry categories but what is great is it is the interactive agency and website marketing departments that nominate and choose the winners of this and we have to great Vignette customers that were awarded this Web Excellence Award in 2008, first is QAD which is a global manufacturing company. They have websites in more than 90 countries, 27 languages and they use a variety of Vignette solutions. Another winner of the Web Excellence Award is National Instruments. They have eCommerce sites in 40 countries, 9 languages all around the world and again, leverage Vignette solutions, both of them recognized as top websites in their respective industries.

Another award that came out in this last quarter was the Information Week Top 500, Business Technology Innovators. Motorola was ranked number 20 of the top 500 and it was based under innovated use of the website and they use Vignette solutions for almost all their dot com sites including and hellomotto. Another great success is down in Latin America, Terra Networks. It is the leading Spanish language internet portal in Latin America currently averages 2 billion web hits per month in Brazil alone. It was the sole online provider of the Olympic Games in Latin America which they delivered for all the Latin America without a hitch. They use Vignette portals to operate 29 sites in Spanish and Portuguese featuring everything from news to music to video to Terra TV. So, again it all comes down to customer successes and it is great when the industry recognizes what they are doing.

Next theme I want to talk about, number two is innovation. As I said, this is the field for growth. Mike touched on it, over a dozen new products this year, very exciting four new products in Q3 alone. But the one I would like to talk about right now which I think speaks to the innovation of Vignette is the social media leadership that we are showing in the space. We just launched the Vignette Community Applications which is more than just wikis, blogs and forums. It is that but it also reviews, ratings, tags, it is about sharing pictures, videos, it is about doing podcast. It is about creating a social community both internally and externally of employees and customers.

Our social media platform, this is a real social media platform and the price is great. What it allows IT partners and IT professionals to do is to consolidate a budget existing solutions or platforms, what it does for CMOs is it allows them to adjust the needs of their constituents both internal and external. The great thing about VCA or Vignette Community Applications is out of the box, it integrates with other applications, it could be an HR portal, it could be a CRM solution and it integrates with content management out of the box. It could be a Vignette content management. It could be another content management platform.

So that is pretty amazing what our team has developed and deployed there. We also have what we call a social media solution which is levering Vignette community applications but you couple that with Vignette video, Vignette recommendations, analytics and Vignette content management and we are the only enterprise software company that can deliver that today. Again, it speaks to the innovation that has been, that we are doing here at Vignette.

Last theme I want to talk about is focus and this is how things get done. I will talk about the products in marketing team first on that. Most of my leadership team and over half of the team in products and marketing are new to Vignette within the last 6 to 12 months but they are not new to this industry and they are not new to their positions. It is a great and proven team of product to management professionals. I have worked with many of them in the past, some of them at two and three different companies and it is a nice mix of folks that work at high gross software companies and seasoned software professionals too. If you look at the resumes of this team, Microsoft, Oracle, IBM and then a lot of others small or high gross software companies which is important. Also made a point in making sure this team had a competency in the history and demand generation, Mike talked about that, it was very important. Gross product marketing, field marketing and corporate marketing.

Another thing I would like to talk about under focus is going to market. You cannot deal all things to all people. When the process of rolling out several scenarios to target specific web experienced used cases, this allows our sales team to get enabled more quickly and close deals more efficiently. Also Mike talked about getting back to basics with integrated launch campaigns in sales and marketing blitzes, but again these are things that we are doing with our new products to help them get traction and lastly on a go to market, we will talk about vertical orientation. I talked about Vignette Community Applications. Another new product launch was Vignette Media 7.0 which is a true content management platform specific to Telco, media and entertainment.

Vignette is the only content management company to have a solution a 100% focused on the needs of this vertical, Telco, media and entertainment. We are the only solution to manage editorial and promotional and marketing content in one integrated platform and we can monetize and merchandize digital media using a single, integrated council, workflow and publishing process. The feedback we are getting from our customers and analysts is just overwhelmingly positive and again I think the go-to-market focus on this vertical is you will see more of that from us going forward.

Closing, I will say where I started. I am more jazzed now than I was six months ago. We will continue to talk about our customer successes because that is what it is all about and that is what is important. Innovation, continue to invest in innovation, our products are people because of its appeal for growth and we will focus, we have the right team and we are doing all the right stuff. So, we are all really excited to be here and I will now pass it over to our CFO, Pat Kelly.

Pat Kelly

Thank you, Dave. Now, let us turn our attention to the numbers. The high levels of our Q3 results were below guidance for revenue, but in line with our guidance for earnings per share, both total revenue and license revenue came in below our regional expectations. We had only one large deal this quarter which brought down our total license number and our ASP versus recent quarters. As expected and previously discussed, our costs were up versus last year as we continue in making strategic investments in R&D and also as we incurred $2.6 million in restructuring related expenses during the quarter. As a result, our year-over-year GAAP and non-GAAP net income and EPS were down.

Let us talk about revenues a little bit more detail. For the third quarter, total revenue was $41.9 million, down 3.8% from Q3 of last year and revenue generated from our international operations represented 39% of the total during Q3 versus 44% in Q2 of '08 and 35% in Q3 of last year. Our new product bookings were about 11% of the total showing continued progress and opportunity for more growth.

License revenue for the quarter was $7.6 million and represented 18% of the total. As I mentioned, we have one large deal in excess of $1 million during the quarter and no customer accounted for more than 10% of our revenue.

During the quarter, our average sales price for all deals was $191,000. In the first quarter of this year, ASP was $249,000 and in the second quarter, it was $211,000. The decline in ASP in Q3 primarily driven by decrease in the number of large deals closed versus Q1 and Q2 of '08. Services revenue decreased by about $1.3 million or 3.6% versus Q3 of last year.

Let us break that down. Professional services revenue totaled $13.7 million which was flat compared to Q3 of last year. Maintenance revenue is totaled $20.4 million this quarter that was down 6.5% from Q3 of '07 and that decrease partially driven by a significant one time collection we had for back maintenance in Q3 of '07.

Turning now to the cost side, gross margin on license was 96%, which is consistent with prior quarters. Cost of services revenue increased 2.4% versus last year on top of the 3.6% decrease in services revenue, which means that our gross margin on services decreased this quarter.

Our gross margin overall was 61% for the quarter although that is down from 63.2% last year, it is at the high end of our guidance for this quarter.

Now, looking at OpEx, sales and marketing expenses were flat versus Q3 of last year. As planned, R&D was up significantly versus last year at $1 million or 14% from Q3 '07. That increase reflects incremental R&D expenditures associated with the video acquisition and continued strategic investments in new and enhanced products.

G&A was flat versus Q3 of last year. The primary driver in our year over year increase in operating expenses is due to restructuring efforts that took place during the quarter and that totaled $2.6 million. Included in those expenses were employee separation cost of $1.6 million and $1 million in the termination fee associated with the cancellation of our agreement with Virtusa. We have decided the in source, our development resources in hydrobot over the next year so that we can more closely align our recruiting and management practices with a long term needs of our business.

For additional information on the Virtusa amendment signed during the quarter, please refer to the 8-K we filed on August 28. On the net income side, on a GAAP basis, we have a loss from operations of $5.1 million however after making adjustments of $5.6 million including the $2.6 million of restructuring expenses; we generated a non GAAP profit from operations of $0.5 million. Other income is up sharply from last year's trend due to lower cash balances, falling interest rates and some foreign currency loses we experienced that were driven by the strengthening dollar. We did not record any income tax expense in the third quarter but after factoring in the restructuring cost, we have already accrued a sufficient tax provision in first half of the year.

After interest and taxes, our GAAP loss was $4.3 million or $0.19 per share. After non-GAAP adjustments, our non-GAAP net income was $1.2 million or $0.05 per share. The adjustments we make for GAAP to non-GAAP are given in a special table in our press release, key items including amortization of intangibles and acquired technology, stock option expense and the restructuring cost.

Turning to the balance sheet, our cash and investments remain strong at the end of the quarter at $144 million and that is down $8 million from the end of Q2 and I am going to break that $8 million down a little bit. During the first quarter, we used $5 million in cash to repurchase shares in the open market buying back 396,000 shares on an average price of $12.22. That brings the total cash used on the share repurchase program to $120 million. When we started the program, our objectives were to return cash to shareholders and to achieve a more balanced capital structure. We now feel that our capital structure is more balanced and having a healthy balance sheet at this point allows us to weather any potential economic disturbance and also to finance potential acquisitions. An additional $1.7 million of the decline in cash balances versus the second quarter was due to the reevaluation of foreign cash balances at stronger USD rates.

During the quarter, we also used approximately $500,000 of cash flow in operations. DSOs increased from 56 in Q2 to 61 in Q3, that is still well within our goal. Total headcount was 667 at the end of the quarter decreasing a net 20 from last quarter and 3 from last year and the decrease in the quarter is primarily due to the restructuring efforts we talked about earlier.

Now, let me provide some guidance for our revenue and earnings in Q4 and just to remind you, the following guidance reflects our outlook today, October 30, 2008 and contains forward-looking statement subjects to the risk we outlined earlier in the risk disclosure statement. Vignette is not obligated to update guidance during the quarter and if we do so, it will in a public statement.

So, setting the stage for the guidance, first off, the strength of our balance sheet and our ability to generate positive cash flow positions us very well to weather the downturn in the current economy. However, as Mike mentioned given the uncertainty in the economic environment today and the inherent volatility of our business, we are taking a cautious approach to planning for the fourth quarter and 2009.

The restructuring efforts that began in Q3 are mostly complete but a small amount will continue into the fourth quarter and we expect additional special charges of approximately $500,000 in Q4. We expect the overall cost will be down from last year with lower cost of service for professional services and lower variable compensation cost contributing to the decline. A number of factors that will put some pressure on cash flow for Q4, we expect to be breakeven to negative for the quarter on cash flow.

With that background, let me give you some details with regard to guidance. We expect fourth quarter 2008 total revenue to be between $42 million and $47 million and for license revenue to be between 23% and 29% of that. Services revenue will drive the remainder. We expect a gross margin of 62% to 65% depending upon the mix of business in the quarter. In terms of operating expenses, we expect R&D to be approximately 17% to 20% of revenue, sales and marketing to be between 36% and 40% of revenue and G&A to be approximately 9% to 11% of revenue.

Fourth quarter 2008 GAAP net income is currently expected to be between a loss of $0.15 and a loss of $0.01 per share on a fully diluted basis assuming 23.5 million shares outstanding. This includes estimate special charges of $500,000 discussed earlier. We expect adjustments for non GAAP to GAAP to be fairly consistent over the next few quarters with the exception of adjustments related to restructuring efforts that I mentioned earlier.

After adjustments, we expect non GAAP net income per share of $0.01 to $0.14 on a fully diluted basis and that excludes a special charges that I discussed earlier and with that, let me turn the call back over to Karen and we will take questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Nathan Schneiderman - Roth Capital Partners.

Analyst for Nathan Schneiderman - Roth Capital Partners

A handful of questions, first can you talk more about your additional cost cutting measures and in what area?

Pat Kelly

Yes, so Andrew, I guess what I am talking about there is when in the Q3 we talked about how we were going to basically review all of our investments and reallocate and shift around some of that and we have gone through most of that work where there is a little bit that remains to be done in Q4 and we think that will amount to about $500,000 in special charges and then we will be finished with that restructuring process. Does that answer your question?

Analyst for Nathan Schneiderman - Roth Capital Partners

Can you elaborate more on what areas?

Pat Kelly

Sure. I guess mostly focused around geographical investments where we are sort of making investments both sort of in various countries around the world and also in various regions around the US, so we have basically taken a hard look at that and we have made some changes, reduced investments in some areas and in fact increased investments in other areas. So, that is part of it. Another part of it as I mentioned when I was explaining the $2.6 million, there was a million dollars associated with a termination fee with our Virtusa contract and that is really just an opportunity we think for us to in source our development resources in hydrobot in India and we think we can better align our recruiting and managing of those resources for the long-term needs of the business.

So that was the million dollars of the $2.6 million that we just expense in Q3 and the rest of it really has mostly to due with employee separation cost.

Analyst for Nathan Schneiderman - Roth Capital Partners

Okay thanks. Can you talk more about the dynamic towards the end of September and what you are seeing so far in October?

Mike Aviles

In terms of…

Analyst for Nathan Schneiderman - Roth Capital Partners

Just business in general.

Mike Aviles

Well I think no surprise to everybody that the environment is a bit soft and uncertain out there so throughout the year, the activity that we saw in Q3 were similar to what we were experiencing in the first half of the year, Andrew. As many people know, Vignette has a strong vertical presence in the financial service sector as well as the government in a public sector. So, part of what we saw is some of the big deals we are getting smaller and some of the deals were slipping as people were holding back. So, that is pretty much what we saw continuing through Q3.

Analyst for Nathan Schneiderman - Roth Capital Partners

You mean continuing into..? What about what you have seen so far in October?

Mike Aviles

In this business, so much of it is done, it is back weighted towards the end of the quarter so you really do not get a sense of what happens to later on in the quarter but there were some transactions that slipped out at Q3 that we were able to close in the early part of the quarter which again is normal that happens just about every quarter. So we are really not seeing any change one way or the other as we approach Q4 relative to what we saw in Q3.

Analyst for Nathan Schneiderman - Roth Capital Partners

Okay. Have you closed any big deals so far in October?

Mike Aviles

Yes, so what we are, we do not disclose some of interim results in terms of deals that we close, Andrew.

Analyst for Nathan Schneiderman - Roth Capital Partners

Okay. What about can you talk a little bit about any shift in the competitive environment? To what extent have you seen aggressive price competition, has it gotten worse or stayed the same?

Mike Aviles

The market continues to be fairly competitive and fairly aggressive in terms of pricing tactics. So, that is again nothing new. That has been consistent. Oftentimes, you will see some vendors, some competitors, being more aggressive than others. So, I would not say that the environment out there has changed significantly but it is a fairly price intensive.

Analyst for Nathan Schneiderman - Roth Capital Partners

Just a few more, in terms of your license bookings as a percent, how much were the new products and which product has received good traction in the marketplace so far?

Mike Aviles

In my comments, Andrew I said that a new product bookings were 11% of the total in Q3 and I think we saw some from, we saw a reasonable mix across all of the new products that we have.

Analyst for Nathan Schneiderman - Roth Capital Partners

To what extent are you seeing a pressure on maintenance renewals and pricing and to what magnitude?

Mike Aviles

So, in terms of renewals, we continue to experience renewals in the high 80s so it is pretty consistently sort of between 85% and 90% and we have not seen any change in that. We do have a little pressure on the maintenance revenue but it is not from the renewal side, it is from how much are we selling so all of our efforts are designed towards selling more license revenue which is what is going to help us grow maintenance revenue over time.

Analyst for Nathan Schneiderman - Roth Capital Partners

Okay, one last question. Have you seen customers stretching payments at all and to what extent?

Mike Aviles

No, we have not seen any issues with customers stretching payments.


(Operator's instruction) Your next question comes from the line of Mark Schappel - Benchmark Company.

Mark Schappel - Benchmark Company

I was wondering if you could provide an update on the sales organization in terms of the number of quota carriers, maybe some turnover in the quarter as well as specialty as the sales management at the moment.

Mike Aviles

About a quarter or two ago, Mark, we have decided not to disclose the number of quota carrying anymore because we felt that at this point in time is really irrelevant. Our issue is not a capacity issue. It was really more of an enablement. So, we stopped getting away from that a little bit. The sales force itself has stabilized. We hope we continue to see that so I think we are making good progress in terms of the people we have been bringing on getting them better enable on the new and existing products from the sales management perspective as you probably now, we do not make it a practice to talk about people leaving Vignette but we announce that our shipment ahead of sales and services each transitioning out of the business so that is going to happen. I am acting as the interim and we will leverage the experienced team that we build at Vignette but I am not going to rush to fill the position immediately because I am taking it as an opportunity to reevaluate the work structure, our go-to-market and our sales processes.

Mark Schappel - Benchmark Company

Okay thank you and on the shortfall, was that on the website of the business or was it on the work flow imaging side of the business or did you see it probably on both?

Mike Aviles

No change in general, we had a good quarter on imaging of work flow side of the business and as I talked about some of the progress that we have been making as we put more focus so we do not split out the business but I will generally answer your question. So imaging and work flow, we were pleased with what we were able to do this past quarter and therefore the shortfall was more on the other side on the website.


(Operator's instruction) It appears that we have no further question. You may proceed with your presentation or any closing remark.

Mike Aviles

Okay, thank you Karen and thank you all for joining the call today. As we said, we are going to take a cautious approach as we move into Q4 and to fiscal '09 due to the environment that we are in. Fortunately, Vignette has the balance sheet and the financial strength to invest to the uncertain economic environment. We will continue to bring powerful solutions to the market that will help our customers drive their businesses, build their brands and deliver stronger operational efficiencies and we also believe we are focused on the right things and we are investing in the right areas to grow our business. So, we appreciate your support and we look forward to updating you in our progress couple of months now. Thank you very much.

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