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EXHIBIT 99.1
BREAKAWAY SOLUTIONS ANNOUNCES
PRELIMINARY THIRD QUARTER RESULTS
BOSTON, MA- October 4, 2000 - Breakaway Solutions, Inc. (NASDAQ: BWAY), a
leading Full Service Provider (FSP) of e-business solutions that offers
integrated strategy, e-business implementation and application hosting to
growing enterprises, reported today that it expects its financial results for
the third quarter ending September 30, 2000 to be lower than published analysts'
expectations.
Breakaway Solutions expects its total revenue for the third quarter to be
approximately equal to or slightly greater than the $35.2 million in the second
quarter of 2000. This is approximately 7% below the low end of published
analysts' expectations. The Company's revenue is expected to represent 380%
growth from the third quarter of 1999 with Application Hosting revenue growing
approximately 970% from the third quarter of 1999. Application Hosting revenue
in the third quarter of 2000 is expected to represent 20% of total revenue, an
increase from 15% in the second quarter of 2000. Also, cash loss per weighted
average shares and stock options is expected to be between $.02 and $.04,
compared to the First Call consensus estimate of a $.01 loss.
The Company attributes the revenue and earnings shortfall to a number of market
conditions, including cancelled or delayed projects, lengthening sales cycles,
scaled back projects and fewer dotcom opportunities.
"We've seen a change in the market environment that almost every company in our
sector is seeing, which has led us to make some revisions in our forecast for
the third quarter of this year," said Gordon Brooks, president and CEO of
Breakaway Solutions. "Everyone is feeling some impact from fewer dotcoms, but
that trend is not new and has been used as a convenient scapegoat.
"The reality is that e-service providers are facing brick and mortar customers
who now demand strong differentiation, and a compelling and sustainable value
proposition for their businesses. We have built Breakaway Solutions to create
value for our customers and are confident our FSP business model will continue
to be a strong competitive differentiator. At the same time, we are making
internal changes to strengthen our company, and help us efficiently deliver on
that model around the world."
As part of the internal changes geared towards driving Breakaway Solutions'
future revenue growth and profitability, the Company is:
o Pursuing cost reductions in the fourth quarter by realigning billable
staff and making staff reductions of approximately 9 percent.
o Implementing general and administrative expense reductions.
o Continuing to build the sales organization, which increased from 33 in
Q2 to 61 in Q3.
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o Offering an ASP Enablement program to open additional revenue channels
from Independent Software Vendors (ISVs) and vertical ASPs.
o Increasing focus on emerging markets in Europe and Asia.
"Less than 1 percent of all business is conducted over the Internet today so we
believe there is still a lot of work to be done," said Brooks. "The value that
Breakaway Solutions provides to its customers will outlast any temporary
fluctuations in the marketplace. As the market catches up to the widely
projected increases in demand for e-business and application hosting services,
Breakaway Solutions is well positioned to take advantage of that growth."
Breakaway Solutions has scheduled a conference call with investors at 5:30 p.m.
EST on October 4, 2000 to discuss this announcement and is scheduled to report
final results the evening of October 26, 2000. The call can also be accessed via
the Breakaway Solutions corporate Web site at www.breakaway.com and at
www.vcall.com.
ABOUT BREAKAWAY SOLUTIONS
Breakaway Solutions, Inc. (Nasdaq: BWAY - NEWS) is a Full Service Provider (FSP)
of e-business solutions specializing in defining, creating, and operating
sustainable digital businesses for growing enterprises through strategy, e-
business implementation, and application hosting services. Headquartered in
Boston, Mass., Breakaway Solutions has a network of regional offices and
Internet Solutions Centers in major cities across the U.S. and in Europe, as
well as 11 Application Hosting facilities in North America, Europe, Asia and
Australia. Breakaway Solutions can be reached at 617/960-3400 or at
www.breakaway.com.
Except for the historical information contained in this announcement, the
matters discussed in this announcement are "forward-looking statements" (as that
term is used in the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties, including risks relating to the attractiveness
of Breakaway's Full Service Provider model to its current and prospective
customers, likely variations in quarterly revenues and operating results, the
ability to realize benefits from acquisitions and strategic alliances, risks in
conducting business outside the United States, the adoption and acceptance of
application hosting services by growing enterprises, personnel and customer
retention, ability to raise additional capital, equity dilution, business
change, product acceptance and customer demand, variation in quarterly results,
competition, and growth management detailed from time-to-time in Breakaway
Solutions, Inc.'s filings with the Securities and Exchange Commission. Breakaway
Solutions, Inc. draws the reader's attention to the factors described in its
Quarterly Report on Form 10-Q for the Period Ended June 30, 2000 under the
heading "Factors That May Affect Future Results." Any such forward-looking
statements speak only as of the date such statements are made, and the company
undertakes no obligation to publicly release the results of any revision to
these forward-looking statements or otherwise update or supplement this
announcement or the risk factors contained in its filings with the Securities
and Exchange Commission.
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