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Internal Investigation Delays WebMethods' Quarterly SEC Filing

By Yuki Noguchi
Washington Post Staff Writer
Thursday, November 11, 2004; Page E05

WebMethods Inc. said yesterday it has delayed filing its quarterly financial results because an employee in one of its international subsidiaries has raised concerns about some of its business dealings.

The software maker said its audit committee is investigating the matter, which it said involves a "small number" of the subsidiary's resellers.

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WebMethods publicly announced its results last month, but the Fairfax company had not yet filed those results with the Securities and Exchange Commission.

"We are conducting a thorough and complete investigation of our employee's concerns," Mary Dridi, the company's chief financial officer and executive vice president, said in a written statement. The company offered no details of the employee's allegations but said it "has not discovered any evidence supporting the concerns."

The company's independent auditors would not be able to complete its review of the company's fiscal second-quarter results until the investigation is complete, the company said.

On Oct. 21, the company announced it lost $3.3 million (6 cents a share) in its fiscal second quarter, compared with a loss of $4.5 million (9 cents) in the same period a year earlier. The company's revenue grew to $51.2 million, from $45.4 million during the same period ended Sept. 30 last year.

WebMethods' shares closed yesterday at $7.16, up 7 cents, before the announcement. Shares fell as much as 9 percent in after-hours trading.

The company helps its clients integrate software applications, but it has been struggling in recent years against competition from larger companies such as International Business Machines Corp.

Last month, WebMethods founder Phillip Merrick resigned as chief executive, citing health reasons.


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