Verity Profitable But CautiousVerity Profitable But Cautious

Verity Inc. might be back in the swing of profitability, but don't look to the knowledge-management vendor for hints that a recovery in the software sector is in the offing. The company, which reported its third straight profitable quarter Thursday, has put its brief, two-quarter swing into the red last year behind it, but it's cautious about the coming months. Verity is expecting second-quarter revenue to lag behind the $22.6 million it brought in a year ago, and it's not budgeting any growth in operating expenses.

During a conference call with analysts, CEO Gary Sbona lauded the company's efforts to retain profitability during challenging economic times, but he stopped short of being enthusiastic. "We're on the low end of our expectations," he said. "That's not a particularly comfortable position for us." Sbona stressed that the company's cautious projections shouldn't be interpreted as an indication that the economy is worsening. Rather, conditions simply are too difficult to predict, he said.

Despite the uncertainty, analysts applauded Verity's executive team for "great execution." For its first quarter, ended Aug. 31, Verity reported a profit of $1.4 million, or 4 cents a share, on revenue of $22 million, compared with a loss of $2.5 million, or 7 cents, on revenue of $20.1 million a year earlier. During the quarter, the company launched an updated version of its K2 Enterprise knowledge-management suite, and its technology also is a component of Documentum Inc.'s recently released update to its document-management system.