<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-26298
HARBINGER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
GEORGIA 58-1817306
(State or other Jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
1277 LENOX PARK BOULEVARD 30319
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
The number of shares of the issuer's class of capital stock outstanding as of
November 11, 1999, the latest practicable date, is as follows: 38,713,565
shares of Common Stock, $.0001 par value.
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<PAGE> 2
HARBINGER CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets - (Unaudited) September 30, 1999
and December 31, 1998.....................................................
Consolidated Statements of Operations (Unaudited) - Three
Months and Nine Months Ended September 30, 1999 and 1998...................
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) -
Three Months and Nine Months Ended September 30, 1999 and 1998.............
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1999 and 1998..............................
Notes to Consolidated Financial Statements (Unaudited).....................
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................
Item 6. Exhibits.........................................................................
SIGNATURES................................................................................
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARBINGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 9,706 $ 33,059
Short-term investments............................................ 57,491 59,248
Accounts receivable, less allowances for returns and
doubtful accounts of $4,725 at September 30, 1999
and $5,464 at December 31, 1998................................. 47,087 35,891
Royalties receivable, less allowance for doubtful accounts
of $0 at September 30, 1999 and $3,614 at December 31, 1998..... 322 1,730
Deferred income taxes............................................. 2,103 2,103
Other current assets.............................................. 4,373 5,622
-------------- --------------
Total current assets.......................................... 121,082 137,653
-------------- --------------
Property and equipment, less accumulated depreciation
and amortization................................................ 26,668 23,150
Intangible assets, less accumulated amortization.................. 16,357 16,803
Deferred income taxes............................................. 698 698
Other assets...................................................... 2,256 65
-------------- --------------
$ 167,061 $ 178,369
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 5,971 $ 5,566
Accrued expenses.................................................. 21,523 31,571
Deferred revenues................................................. 19,795 21,213
-------------- --------------
Total current liabilities..................................... 47,289 58,350
-------------- --------------
Commitments and contingencies
Redeemable preferred stock:
Zero coupon redeemable preferred stock, no par value; 0 and
2,000,000 shares authorized, issued and outstanding at -- --
September 30, 1999 and December 31, 1998........................
Shareholders' equity:
Preferred stock, no par value; 20,000,000 and 18,000,000
shares authorized at September 30, 1999 and December 31, 1998; -- --
none issued or outstanding .....................................
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 42,942,226 shares and 42,313,031 shares issued
as of September 30, 1999 and December 31, 1998.................. 4 4
Additional paid-in capital........................................ 204,363 201,615
Accumulated deficit............................................... (58,182) (73,528)
Accumulated other comprehensive loss.............................. (1,369) (622)
Treasury stock, 4,323,050 shares and 1,562,100 shares as of
September 30, 1999 and December 31, 1998........................ (25,044) (7,450)
-------------- --------------
Total shareholders' equity............................. 119,772 120,019
-------------- --------------
$ 167,061 $ 178,369
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ------------------------
1999 1998 1999 1998
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Services ...................................................... $ 29,599 $ 22,137 $ 81,406 $ 63,878
Software ...................................................... 11,313 13,283 31,736 34,772
--------- --------- --------- ---------
Total revenues .............................................. 40,912 35,420 113,142 98,650
--------- --------- --------- ---------
Direct costs:
Services ...................................................... 12,038 9,123 34,285 24,236
Software ...................................................... 1,139 1,169 3,626 2,839
--------- --------- --------- ---------
Total direct costs .......................................... 13,177 10,292 37,911 27,075
--------- --------- --------- ---------
Gross margin ............................................. 27,735 25,128 75,231 71,575
--------- --------- --------- ---------
Operating costs:
Selling and marketing ......................................... 9,900 9,157 27,393 23,321
General and administrative .................................... 6,190 13,914 19,458 25,467
Depreciation and amortization ................................. 2,445 2,036 6,860 5,831
Product development ........................................... 2,974 2,798 8,967 7,641
Charge for purchased in-process product development,
write-off of software development costs, restructuring,
acquisition related and other charges ....................... -- 13,978 -- 27,027
--------- --------- --------- ---------
Total operating costs .................................... 21,509 41,883 62,678 89,287
--------- --------- --------- ---------
Operating income (loss) .............................. 6,226 (16,755) 12,553 (17,712)
Interest income, net .............................................. 717 1,202 2,376 3,780
--------- --------- --------- ---------
6,943 (15,553) 14,929 (13,932)
Income (loss) from continuing operations before income taxes ......
Income tax expense ................................................ 571 560 939 705
--------- --------- --------- ---------
Income (loss) from continuing operations .......................... 6,372 (16,113) 13,990 (14,637)
Income (loss) from discontinued operations ........................ 1,356 (7,331) 1,356 (8,185)
--------- --------- --------- ---------
Net income (loss) ........................................... $ 7,728 $ (23,444) $ 15,346 $ (22,822)
========= ========= ========= =========
Basic earnings per common share:
Income (loss) from continuing operations ...................... $ 0.17 $ (0.39) $ 0.36 $ (0.36)
Income (loss) from discontinued operations .................... 0.03 (0.17) 0.03 (0.19)
--------- --------- --------- ---------
Net income (loss) per common share .......................... $ 0.20 $ (0.56) $ 0.39 $ 0.55)
========= ========= ========= =========
Weighted average number of common shares outstanding .............. 38,607 42,163 38,986 41,691
========= ========= ========= =========
Earnings per common share assuming dilution:
Income (loss) from continuing operations ...................... $ 0.16 $ (0.39) $ 0.35 $ (0.36)
Income (loss) from discontinued operations .................... 0.03 (0.17) 0.03 (0.19)
--------- --------- --------- ---------
Net income (loss) per common share .......................... $ 0.19 $ (0.56) $ 0.38 $ (0.55)
========= ========= ========= =========
Weighted average number of common shares outstanding assuming
dilution ...................................................... 40,812 42,163 40,421 41,691
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) ................................................. $ 7,728 $ (23,444) $ 15,346 $ (22,822)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ...................... (5) 1,040 (747) 549
--------- --------- --------- ---------
Comprehensive income (loss) ................................... $ 7,723 $ (22,404) $ 14,599 $ (22,273)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
HARBINGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows provided by operating activities .................................. $ 3,501 $ 2,924
--------- ---------
Cash flows from investing activities:
Net (purchases) redemptions of short-term investments .................... 1,757 (34,134)
Purchases of property and equipment ...................................... (9,360) (9,279)
Additions to software development costs .................................. (4,389) (2,837)
Proceeds from sale of discontinued operations .......................... 500 --
Acquisitions and investment in joint venture ........................... (300) (3,547)
--------- ---------
Net cash used in investing activities ................................ (11,792) (49,797)
--------- ---------
Cash flows from financing activities:
Exercise of stock options and warrants and issuance of stock under
employee stock purchase plan ........................................... 2,748 11,540
Principal payments under notes payable and long-term debt ................ -- (623)
Purchases of common stock ................................................ (17,594) --
--------- ---------
Net cash provided by (used in) financing activities .................... (14,846) 10,917
--------- ---------
Net decrease in cash and cash equivalents .................................... (23,137) (35,956)
Cash and cash equivalents at beginning of period ............................. 33,059 69,811
Effect of exchange rates on cash held in foreign currencies .................. (216) 80
Cash received from acquisitions .............................................. -- 52
--------- ---------
Cash and cash equivalents at end of period ................................... $ 9,706 $ 33,987
========= =========
Supplemental disclosures:
Cash paid for interest ....................................................... $ -- $ 50
========= =========
Cash paid for income taxes ................................................... $ 239 $ 530
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The financial information included herein is unaudited. However, the
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary to a fair
presentation of the financial position, results of operations, comprehensive
income (loss) and cash flows for the interim periods. Operating results for the
three months and nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in Harbinger Corporation's ("Harbinger" or the "Company") Form
10-K for the year ended December 31, 1998 and the Company's current reports on
Form 8-K dated April 2, 1999 and September 30, 1999.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 consolidated
financial statements to conform with the 1999 presentation.
2. DISTRIBUTION AGREEMENT
During the second quarter of 1999 the Company executed an agreement
("Agreement") with a former distributor. Under the agreement, the distributor
paid the Company a total of approximately $2.0 million in defined installments
through August 30, 1999 in settlement of certain royalty receivables,
maintenance services provided to the distributor's customers by the Company
from 1995 through 1999 and an additional license of source code provided to the
distributor. The settlement proceeds were allocated pro-rata to the three
components of the Agreement based on their relative fair values. The following
credits were recorded to the Company's unaudited consolidated statement of
operations in each of the second and third quarters of 1999 for the total $2.0
million received: $502,000 to general and administrative costs for collection of
bad debts, $314,000 to direct costs of services for reimbursement of
maintenance costs and $210,000 to software revenue for license of source code.
In 1995 the Company issued to this distributor 4,000,000 shares of
zero coupon redeemable preferred stock, of which 2,000,000 shares were
outstanding at December 31, 1998. These shares have been cancelled in
conjunction with the termination of the original distributor agreement.
3. INVESTMENT IN JOINT VENTURE
During the third quarter of 1999, the Company became one-third owner
of a limited liability company, GLINK, LLC ("GLINK"), a joint venture
established to develop an electronic market place for the grocery industry. The
Company made an initial $300,000 cash investment, which was recorded in "Other
assets" on the unaudited consolidated balance sheets at September 30, 1999.
During the third quarter of 1999, GLINK licensed certain Company software for
$250,000
<PAGE> 8
and contracted for $252,000 in professional services for which the Company
received a 12-month note receivable. The Company will account for its ownership
in GLINK using the equity method of accounting, which requires the Company to
record its share of gains and losses of GLINK to the Company's consolidated
statements of operations in the period they occur. Such earnings or losses were
immaterial for the quarter ended September 30, 1999.
4. SHAREHOLDERS' EQUITY
On March 22, 1999 the Board of Directors approved the purchase of an
additional 10% of the Company's outstanding shares of common stock under its
existing stock repurchase program. This is in addition to the 10% repurchase
authorized on October 2, 1998 and completed on March 19, 1999.
5. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF
SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND
OTHER CHARGES
For the nine months ended September 30, 1999, the Company did not
incur charges for purchased in-process product development, write-off of
software development costs, restructuring, acquisition related and other
charges ("Charges"). A summary of the Charges incurred in 1998 is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Integration costs $ 2,894 $ 13,919
Lease termination and other 4,490 4,490
Transaction charges -- 638
Asset write downs 4,193 4,459
Severance costs -- 1,120
Other restructuring charges 2,401 2,401
-------- --------
$ 13,978 $ 27,027
======== ========
</TABLE>
Approximately $372,000 and $4.1 million of the Charges incurred in the
three months and nine months ended September 30, 1998, respectively, resulted
from the redirection of internal resources and their associated costs
("Integration Activity Costs") to manage integration activities. In 1999 the
management of these activities has been completed and these internal resources
and their associated costs are therefore recorded to their original operating
cost categories.
At September 30, 1999 the accrued liabilities related to the Charges
were approximately $4.0 million, compared to approximately $7.5 million at
December 31, 1998. These liabilities consist primarily of reserves for lease
terminations, severance costs and continued service obligations and
professional fees associated with phased-out products. Certain Charges involve
management estimates, including lease termination costs and liabilities and
obligations associated with phasing out products. Actual results could vary
from these estimates.
6. INCOME TAXES
The Company reduced its valuation allowance in the quarter-ended March
31, 1999 by $844,000. This relates to the reduction in the gross deferred
income tax assets that are realized through reversals of existing deductible
temporary differences. The Company continually reviews the adequacy of the
valuation allowance and recognizes these benefits as reassessment indicates it
is more likely than not that the benefits will be realized.
<PAGE> 9
7. DISCONTINUED OPERATIONS
The Company discontinued its TrustLink Procurement business ("TLP") on
September 30, 1998 and established a $6.4 million reserve for the estimated
loss on disposal of TLP, including anticipated losses during the phase-out
period.
In the second quarter of 1999 the Company sold the intangible assets
and certain property and equipment of TLP for $1.3 million, comprised of cash
of $500,000 and a note receivable of $800,000. The resulting loss on disposal
of TLP was $2.0 million. The operating loss incurred for TLP from the
measurement date to September 30, 1999 was $1.2 million. Repayment on the note
will occur at the earlier of the buyer achieving certain sales targets or
December 31, 2000.
At September 30, 1999 the remaining balance in the loss reserve was
$3.2 million, available for certain remaining contingencies associated with the
disposal of TLP. Such contingencies primarily relate to lease termination
costs, customer transition issues and collection risks associated with notes
and accounts receivable.
The assets and liabilities of TLP are included in the Company's consolidated
balance sheets as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Accounts receivable $ 226 $ 454
Other current assets 62 106
Property and equipment, net -- 766
Intangible assets, net -- 2,454
Deferred revenues -- (45)
Current liabilities (106) (281)
--------- ---------
Net assets $ 182 $ 3,454
========= =========
</TABLE>
The Company discontinued its TrustedLink Banker division ("Banker") on
December 31, 1997 and established a $4.0 million reserve for the estimated loss
on disposal of Banker, including anticipated losses during the phase-out
period. The disposal and operations of Banker were substantially completed by
December 31, 1998. During the third quarter of 1999, the Company reversed the
remaining reserve to "Income (loss) from discontinued operations," as remaining
contingencies associated with the disposal of Banker were resolved.
8. RELATED PARTY TRANSACTIONS
The Company received notes receivable during the first quarter of 1999
of $605,000 from five employees who are the former shareholders of EDI Works!
LLC., a company acquired in 1998. The terms of the full-recourse notes are 18
months with an annual interest rate of 8.75%. Interest accrues on a monthly
basis with principal and interest due at the end of the term of the notes.
9. SEGMENT INFORMATION
The Company operates in a single industry segment: the establishment
and management of electronic commerce relationships between businesses. The
Company manages its business along geographical lines, thus resulting in three
reportable segments: North America, Europe, and Asia Pacific and Latin America.
The accounting policies of each segment are the same as those described in the
summary of significant accounting policies. Revenues are attributed to a
reportable segment based on the location of the customer. Management evaluates
the performance of each segment on the basis of operating income, excluding
integration and restructuring charges and certain general and administrative
credits. Intersegment royalties are calculated based upon revenues, as defined,
derived from the sales of certain software products and services at agreed upon
percentages between the segments.
A summary of the Company's reportable segments for the nine months
ended September 30, 1999 and September 30, 1998 is presented below (in
thousands):
<PAGE> 10
<TABLE>
<CAPTION>
Asia Pacific
North America Europe and Latin America Total
------------- ------ ----------------- ----------
<S> <C> <C> <C> <C>
Revenues:
1999 $ 98,056 $ 15,990 $ 2,181 $ 116,227
1998 $ 84,108 $ 15,226 $ 2,119 $ 101,453
Intersegment Royalties:
1999 $ 3,085 $ -- $ -- $ 3,085
1998 $ 2,803 $ -- $ -- $ 2,803
Operating Income (as defined):
1999 $ 8,864 $ 1,738 $ 196 $ 10,798
1998 $ 14,523 $ 670 $ 582 $ 15,775
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Total gross revenues for reportable segments $ 116,227 $ 101,453
Elimination of intersegment royalties (3,085) (2,803)
----------- -----------
Total consolidated revenues $ 113,142 $ 98,650
=========== ===========
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Operating Income (loss) (as defined):
Total operating income for reportable segments $ 10,798 $ 15,775
Charges for integration and restructuring -- (27,027)
Certain general and administrative credits (charges) 1,755 (6,460)
----------- -----------
Total consolidated operating income (loss) $ 12,553 $ (17,712)
=========== ===========
</TABLE>
A summary of the Company's reportable segments for the quarters ended September
30, 1999 and September 30, 1998 is presented below (in thousands):
<TABLE>
<CAPTION>
Asia Pacific
North America Europe and Latin America Total
------------- -------- ----------------- --------
<S> <C> <C> <C> <C>
Revenues:
1999 $ 36,030 $ 5,159 $ 645 $ 41,834
1998 $ 30,361 $ 4,961 $ 969 $ 36,291
Intersegment Royalties:
1999 $ 922 $ -- $ -- $ 922
1998 $ 871 $ -- $ -- $ 871
Operating Income (as defined):
1999 $ 5,016 $ 666 $ 42 $ 5,724
1998 $ 3,015 $ 308 $ 360 $ 3,683
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Total gross revenues for reportable segments $ 41,834 $ 36,291
Elimination of intersegment royalties (922) (871)
----------- -----------
Total consolidated revenues $ 40,912 $ 35,420
=========== ===========
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Operating Income (loss) (as defined):
Total operating income for reportable segments $ 5,724 $ 3,683
Charges for integration and restructuring -- (13,978)
Certain general and administrative credits (charges) 502 (6,460)
----------- -----------
Total consolidated operating income (loss) $ 6,226 $ (16,755)
=========== ===========
</TABLE>
10. CONTINGENCIES
The Company is involved in certain legal actions and other claims
arising out of the ordinary course of business, including discontinued
operations and the phase-out of certain non-strategic software products.
Additionally, a shareholder class action lawsuit was filed against the Company
in September 1999 (see Part II, Item 1 of this Form 10-Q). While the ultimate
results and outcomes of these actions and claims cannot be determined,
management does not expect that they will have a material adverse effect on the
Company's results of operations or financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere
herein and the Company's Form 10-K for the year ended December 31, 1998 and the
Company's current reports on Form 8-K dated April 2, 1999 and September 30,
1999.
OVERVIEW
Harbinger Corporation (the "Company") primarily generates revenues
from various services and license fees on software sales. Revenues for services
principally include subscription fees for transactions on HARBINGER.NET, the
Company's electronic commerce portal; software maintenance, and professional
service fees for implementation, outsourcing, and training. Subscription fees
are a combination of monthly access charges and transaction-based usage charges
and are recognized as incurred each month. Software maintenance is billed in
advance with revenue deferred and recognized ratably over the one-year service
period. Revenues for professional services are based on actual services
rendered and are recognized as services are performed. License fees for
software are generally recognized upon shipment, net of estimated returns or
may be billed on monthly subscription terms generally over a 2-3 year period.
Software revenues also include royalty revenues under distribution agreements
with third parties which are recognized either on shipment of software to a
distributor or upon sales to end users by a distributor, depending on the terms
of the distribution agreement.
RESULTS OF OPERATIONS
REVENUES
Total revenues increased 15% to $113.1 million in the nine months
ended September 30, 1999 from $98.7 million in the same period in 1998.
Revenues for services increased 27% to $81.4 million in the nine months ended
September 30, 1999 from $63.9 million in the same period in 1998. This increase
is attributable to growth in the Company's outsourcing and implementation
services, as well as growth in subscription fees for HARBINGER.NET. Service
revenues for the nine months ended September 30, 1999 include $400,000 for past
services that were billed in the third quarter of 1999. Revenue from software
sales decreased 9% to $31.7 million in the nine months ended September 30, 1999
from $34.8 million in the same period in 1998 due to the phase-out of certain
non-strategic software products, ("Sunset Products") and the discontinued
relationships with certain third party resellers of the Company's software
products.
<PAGE> 12
Total revenues increased 16% to $40.9 million in the three months
ended September 30, 1999 from $35.4 million in the same period in 1998.
Revenues for services increased 34% to $29.6 million in the three months ended
September 30, 1999 from $22.1 million in the same period in 1998. Service
revenues for the three months ended September 30, 1999 include $924,000 for
past services that were billed in the third quarter of 1999. Excluding these
billings, revenues from services would have increased 29.5% to $28.7 million in
the three months ended September 30, 1999, primarily attributable to growth in
the Company's outsourcing and implementation services as well as subscription
fees for HARBINGER.NET. Revenues from software license fees decreased 15% to
$11.3 million in the three months ended September 30, 1999 from $13.3 million
in the same period in 1998 due to the phase-out of certain non-strategic
software products ("Sunset Products") and the discontinued relationships with
certain third party resellers of the Company's software products.
DIRECT COSTS
Direct costs for services increased to $34.3 million, or 42.1% of
services revenues, in the nine months ended September 30, 1999, from $24.2
million, or 37.9% of services revenues, in the nine months ended September 30,
1998. Excluding past services that were billed in the third quarter of 1999,
direct costs for services would have increased to 42.3% of services revenue for
the nine months ended September 30, 1999. This increase in direct costs for
services as a percentage of total services revenues primarily reflects the
effects of a higher mix of professional services revenues in 1999 and the
effect of reallocating costs to Integration Activity Costs in 1998. Direct
costs for software increased to $3.6 million, or 11.4% of software revenues, in
the nine months ended September 30, 1999, from $2.8 million, or 8.2% of
software revenues, in the nine months ended September 30, 1998. The increase in
direct software costs as a percentage of software revenues is primarily due to
increased amortization of capitalized software costs combined with the decline
in software revenues from Sunset Products.
Direct costs for services increased to $12.0 million, or 40.7% of
services revenue, in the three months ended September 30, 1999, from $9.1
million, or 41.2% of services revenue, in the three months ended September 30,
1998. Excluding past services that were billed in the third quarter of 1999,
direct costs for services would have increased to 42.0% of services revenue for
the three months ended September 30, 1999. This increase in direct costs for
services as a percentage of services revenues reflects the effects of a higher
mix of professional services revenues in 1999, principally through increased
outsourcing and implementation activities, as well as the effect of
reallocating costs to Integration Activity Costs during the three months ended
September 30, 1998. Direct costs for software decreased to $1.1 million, or
10.1% of software revenues, in the three months ended September 30, 1999, from
$1.2 million, or 8.8% of software revenues, in the three months ended September
30, 1998. The increase in direct software costs as a percentage of software
revenues is primarily attributable to a decline in software revenues from
Sunset Products.
SELLING AND MARKETING
Selling and marketing expenses increased 17% to $27.4 million, or
24.2% of revenues, in the nine months ended September 30, 1999 from $23.3
million, or 23.6% of revenues, in the nine months ended September 30, 1998. For
the third quarter, selling and marketing expenses increased 8% to $9.9 million,
or 24.2% of revenues, in the three months ended September 30, 1999, from $9.2
million, or 25.9% of revenues, in the three months ended September 30, 1998.
For both the nine-month and three-month period comparisons, the increase in
expenses is primarily due to positioning of the Company's E-Commerce portal
HARBINGER.NEt. In addition, the increase for the nine-month period in 1999 is
partially attributable to the effect of reallocating costs to Integration
Activity Costs in 1998. The Company expects selling and marketing expenses to
continue to increase, as it recently announced its intention to spend
approximately $21 million in sales marketing and brand awareness over the next
five quarters.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 24% to $19.5 million in
the nine months ended September 30, 1999, from $25.5 million in the nine months
ended September 30, 1998. As a percentage of revenues, these expenses decreased
to 17.2% of revenues in the nine months ended September 30, 1999 from 25.8% of
revenues in the nine months ended September 30, 1998. The 1999 period includes
a credit of $1.7 million due to the receipt of an outstanding royalty
<PAGE> 13
receivable from a specific customer that had been reserved for in 1998. The
1998 period includes a charge of $6.5 million due to a reserve recorded for an
outstanding royalty and accounts receivables from a reseller and certain other
customer accounts. If this receipt and charge had not occurred, general and
administrative expense would have been $21.2 million or 18.8% of revenues in
1999 and $19.0 million or 19.3% of revenues in 1998. Excluding the
aforementioned bad debt recovery and bad debt reserve, the increase in general
and administrative expense is primarily attributable to the effect of
reallocating costs to Integration Activity Costs in 1998, an increase in office
space in 1999 to accommodate expansion and investments in information
technology in 1999.
For the third quarters, general and administrative expenses decreased
56% to $6.2 million in the three months ended September 30, 1999 from $13.9
million in the three months ended September 30, 1998. As a percentage of
revenues, these expenses decreased to 15.1% of revenues in the three months
ended September 30, 1999 from 39.3% of revenues in the three months ended
September 30, 1998. The quarter ended September 30, 1999 includes a credit of
$502,000 due to the receipt of an outstanding royalty receivable from a
specific customer that had been reserved for in 1998. The quarter ended
September 30, 1998 includes a charge of $6.5 million due to a reserve recorded
for outstanding royalty and accounts receivables from a reseller and certain
other customer accounts. If this receipt and charge had not occurred, general
and administrative expenses would have been $6.7 million or 16.4% of revenues
in 1999 and $7.4 million or 21.0% of revenues in 1998. This decrease as a
percentage of revenues is attributed to savings realized from newly negotiated
rebates with national suppliers and improved operational efficiencies derived
from the Company's infrastructure investments in 1999.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 18% to $6.9 million in the
nine months ended September 30, 1999 from $5.8 million in the nine months ended
September 30, 1998. As a percentage of revenues, these expenses increased to
6.1% of revenues in the nine months ended September 30, 1999 from 5.9% revenues
in the nine months ended September 30, 1998. For the third quarters,
depreciation and amortization increased 20% to $2.4 million in the three months
ended September 30, 1999 from $2.0 million in the three months ended September
30, 1998. As a percentage of revenues, these expenses were 6.0% and 5.7% for
the three months ended September 30, 1999 and September 30, 1998, respectively.
The increase in depreciation and amortization for the nine-month and
three-month periods of 1999 compared to 1998, respectively, is due to the
purchase of computer hardware and software associated with the Company's
investment in its information technology infrastructure.
PRODUCT DEVELOPMENT
Total expenditures for product development, including capitalized
software development costs, increased to $11.7 million in the nine months ended
September 30, 1999 from $10.5 million in the same period in 1998. The Company
capitalized product development costs of $2.8 million and $2.8 million in the
nine months ended September 30, 1999 and 1998, respectively, which represented
23.6% and 27.1% of total expenditures for product development in these
respective periods. Product development expenses increased to $9.0 million or
7.9% of revenues in the nine months ended September 30, 1999, from $7.6 million
or 7.7% of revenue in the nine months ended September 30, 1998, reflecting
increased development of internet-based products, the addition of HARBINGER
LABS, the Company's development group devoted to next generation products, and
the effect of reallocating costs to Integration Activity Costs in 1998.
Total expenditures for product development, including capitalized
software development costs, increased to $4.0 million in the three months ended
September 30, 1999 from $3.6 million in the same period in 1998. The Company
capitalized software development costs of $1.0 million and $794,000 in the
three months ended September 30, 1999 and 1998, respectively, which represented
24.7% and 22.1% of total expenditures for product development in these
respective periods. Product development expenses were $3.0 million or 7.3% of
revenues in the three months ended September 30, 1999, and $2.8 million or 7.9%
of revenue in the three months ended September 30, 1998, reflecting increased
development of internet-based products and the addition of HARBINGER LABS, the
Company's development group devoted to next generation products. In addition,
during the third quarter of 1999 the Company began marketing and licensed
certain software originally developed for internal use and reclassified
$1.6 million from property and equipment work-in-progress to capitalized
software development costs.
<PAGE> 14
CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE
DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER CHARGES
("CHARGES")
The Company incurred Charges of $27.0 million during the nine months
ended September 30, 1998 and the year ended December 31, 1998 relating to the
costs of integrating its acquisitions in 1998 and 1997 and its restructuring in
1998. Approximately $4.1 million of the Charges consisted of an allocation of
resources to integration-related activities associated with these acquisitions
("Integration Activity Costs"). For the quarter ended September 30, 1998, the
company incurred $14.0 million in Charges, of which $372,000 related to internal
resources allocated to Integration Activity Costs. The integration activities
were completed by the end of 1998 and the internal resources and their
associated costs are recorded in their original operating cost categories in
1999. (See Note 5 to the accompanying unaudited consolidated financial
statements.)
INTEREST INCOME, NET
Interest income, net, decreased 37% to $2.4 million for the nine
months ended September 30, 1999 from $3.8 million for the nine months ended
September 30, 1998. On a quarter-to-quarter comparison, interest income, net,
decreased 40% to $717,000 in the third quarter of 1999 from $1.2 million in the
third quarter of 1998. These decreases are primarily due to a reduction in cash
and short-term investments for the Company to acquire its common stock and to
invest in its information technology infrastructure.
INCOME TAXES
Income tax expense increased to $939,000 for the nine months ended
September 30, 1999 from $705,000 for the nine months ended September 30, 1998
due to increased income from continuing operations. For the quarters ended
September 30, 1999 and 1998 income tax expense increased to $571,000 from
$560,000, respectively. The effective income tax rate of 6.2% for the nine
months ended September 30, 1999 differs from the expected rate of 39% due to a
reduction in the valuation allowance.
DISCONTINUED OPERATIONS
The Company discontinued its TrustedLink Procurement business ("TLP")
on September 30, 1998 and continues to work to resolve certain unsettled
contingencies at September 30, 1999. The Company discontinued its TrustedLink
Banker division ("Banker") on December 31, 1997. The disposal and operations of
Banker were substantially completed by December 31, 1998. During the third
quarter of 1999, the Company reversed the remaining reserve that had been
established for the estimated loss of disposal of Banker as remaining
contingencies associated with the disposal were resolved. The reserve for loss
on disposal and reclassified results of TLP for 1998 and the reversal of the
reserve in 1999 for TLB are reported in the accompanying consolidated
statements of operations under "Income (loss) from discontinued operations."
(See Note 7 to the financial statements.)
NET INCOME AND EARNINGS PER SHARE
Net income increased to $15.3 million or $0.38 per diluted share for
the nine months ended September 30, 1999 from a net loss of $22.8 million or
$0.55 per diluted share for the nine months ended September 30, 1998. Net
income, adjusted to exclude a specific $1.7 million general and administrative
credit and a credit for discontinued operations in the nine months ended
September 30, 1999 and for the Charges and discontinued operations in 1998, net
of income taxes at 39%, would have been $8.0 million or $0.20 per diluted share
for the nine months ended September 30, 1999, compared to $12.1 million or
$0.28 per diluted share in the same period in 1998, representing a 34% decrease
from 1998 to 1999.
Net income increased to $7.7 million or $0.19 per diluted share for
the quarter ended September 30, 1999 from a net loss of $23.4 million or $0.56
per diluted share for the quarter ended September 30, 1998. Net income,
adjusted to exclude a specific $502,000 general and administrative credit and a
credit for discontinued operations in the third quarter of 1999 and the Charges
and discontinued operations in 1998, net of the effect of income taxes at 39%,
would have been
<PAGE> 15
$3.9 million or $0.10 per diluted share for the third quarter of 1999, compared
to $3.0 million or $0.07 per diluted share in the same period in 1998,
representing a 32% increase from 1998 to 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased $5.5 million to $73.8 million
as of September 30, 1999 from $79.3 million as of December 31, 1998, primarily
due to cash used to acquire common stock of the Company under its ongoing stock
repurchase program and investments in its information technology infrastructure
offset by an increase in accounts receivable.
Management expects the Company will continue to fund its operations,
investment needs and capital expenditures through cash flows generated from
operations, cash on hand, and additional equity and debt capital. Several
factors could have an impact on the Company's cash flows in the future,
including the effects of the Company's recently announced strategic investment
for marketing, sales and technology development projected to be approximately
$28 million in additional spending through December 31, 2000. Additionally, the
Company expects continued spending for its ongoing common stock repurchase
program, liquidation of liabilities incurred due to Charges and discontinued
operations and anticipated outlays for the Company's ongoing effort to enhance
and consolidate its information technology infrastructure. Additionally,
liquidity could be negatively impacted as a result of a shareholder class
action lawsuit filed against the Company in the third quarter of 1999. Although
the outcome of this action cannot be determined at this time, management,
including internal counsel does not believe that the outcome will have a
material adverse effect on the Company's financial position.
The Company does not believe that inflation has had a material impact
on its business, however, there can be no assurance that Harbinger's business
will not be affected by inflation in the future.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products will
not properly process date information in the time period leading up to,
including and following the year 2000. These systems and products often store
and process the year field of date information as two digit numbers, and
misinterpret dates in the year 2000 and beyond as being dates in the year 1900
or subsequent years. This "Year 2000" issue impacts Harbinger both with respect
to its customers as a developer and vendor of computer software products and
services and internally for its information technology ("IT") and non-IT
systems.
The Company formed a Year 2000 Steering Committee in July 1998 to
formally address the Company's Year 2000 issues, which formalized the Company's
Year 2000 assessment program begun in March 1997. The Year 2000 Steering
Committee has overseen the Company's Year 2000 Readiness Assessment Program,
which includes establishing the Company's standard for Year 2000 Readiness,
designing test parameters for its products, IT and non-IT systems, overseeing
the Company's remediation program, including establishing priorities for
remediation and allocating available resources, overseeing the communication of
the status of the Company's efforts to its customers, and establishing
contingency plans in the event the Company experiences Year 2000 disruptions.
The Company describes its products and services as "Year 2000 Ready"
when they have been successfully tested using the procedure proscribed in its
Readiness Assessment Program. This procedure defines the criteria used to
design tests that seek to determine the Year 2000 readiness of a product. Under
the Company's criteria, a software product is Year 2000 Ready if it:
1. Correctly handles date information before, during, and after January
1, 2000, accepting date input, providing date output and performing
calculation on dates or portions of dates.
2. Functions accurately and without interruption before, during and after
January 1, 2000 without changes in operation associated with the
advent of the new century assuming correct configuration.
<PAGE> 16
3. Where appropriate, responds to two-digit date input in a way that
resolves the ambiguity as to century in a disclosed, defined and
pre-determined manner.
4. Stores and provides output of date information in ways that are
unambiguous as to century.
5. Manages the leap year occurring in the year 2000, following the
quad-centennial rule.
As of September 30, 1999 substantially all of the Company's product
readiness testing has been completed. Certain of the Company's customers,
including resellers, are currently using legacy versions of the Company's
products for which a Year 2000 Ready version will not be developed. The Company
has implemented a migration plan to move many of these customers to
functionally similar Year 2000 Ready products although some legacy products
will not be replaced. The Company has implemented a website on the Internet
that includes a general overview of the Company's Readiness Assessment Program,
including a list of products and the applicable Year 2000 Ready version numbers
of such products.
For most of 1999 the Company has been engaged in a significant upgrade
of substantially all of its core IT systems, including those related to sales,
customer service, human resources, finance, accounting and other enterprise
resource planning functions, as a result of its growth in recent years. The
Company believes that the upgraded systems, which it expects to have
substantially implemented by year-end 1999, are all Year 2000 Ready. The
Company is continuing to review its remaining IT systems for Year 2000
Readiness, and expects to modify, replace or discontinue the use of
non-compliant systems before the end of 1999. In addition, the Company is in
the process of evaluating its Year 2000 readiness with respect to non-IT
systems, including systems embedded in the Company's communications and office
facilities. In many cases these facilities have been recently upgraded or are
scheduled to be upgraded before year-end 1999 as a result of the Company's
growth in recent years. Part of the Company's preparation included distributing
surveys to its principal IT and non-IT systems and services vendors soliciting
information on their Year 2000 Readiness. The Company also surveyed its
vendors' websites for additional related information.
The majority of the work performed for the Company's Year 2000
Readiness Assessment Program has been completed by the Company's staff.
Additionally, the Company engaged outside advisors to evaluate the Readiness
Assessment Program and to participate in certain elements of product testing.
The total costs for completing the Year 2000 Readiness Assessment Program,
including modifications to the Company's software products, is estimated to be
between $1 million and $2 million, funded through the Company's internal
operating cash flows. This cost does not include the cost for new software, or
for modifications to existing software, for the Company's core IT and non-IT
systems, as these projects were not accelerated due to the Year 2000 issue.
Approximately $15,000 in cost remains to be incurred to complete the Company's
Readiness Assessment Program.
The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase software products such as those
offered by the Company. Potential customers may also choose to defer purchasing
Year 2000 compliant products until they believe it is absolutely necessary,
thus resulting in potentially stalled market sales within the industry.
Conversely, Year 2000 issues may cause other companies to accelerate purchases,
thereby causing an increase in short-term demand and a consequent decrease in
long-term demand for software products. In addition, Year 2000 issues could
cause a significant number of companies, including current Company customers,
to reevaluate their current software needs, and as a result switch to other
systems or suppliers. Any of the foregoing could result in a material adverse
effect on the Company's business, operating results and financial condition.
The Company has made considerable progress in developing contingency
plans and expects to complete its contingency plans prior to year-end 1999. In
the case of certain of the Company's value-added network operations, it will be
difficult for the Company to seamlessly implement alternative service
arrangements due to the nature and complexity of the customer interface. While
the Company believes that its Readiness Assessment Program is addressing the
risks specific to the Company for the Year 2000 issue, including its operations
in markets outside of the United States, we cannot be assured that events will
not occur that could have a material adverse impact on our business, operating
results and financial condition. Such events include the risk of our failure to
successfully test our software and services that we have certified as Year 2000
Ready, lawsuits from customers and our customers' customers and the inability
to process data internally on our IT systems. Further, the Company is aware of
the risk that domestic and international third parties,
<PAGE> 17
including vendors and customers of the Company, will not adequately address the
Year 2000 problem and the resultant potential adverse impact on them and us.
Regardless of whether the Company's products are Year 2000 compliant, there can
be no assurance that customers will not assert Year 2000 related claims against
the Company.
FORWARD LOOKING STATEMENTS
Other than historical information contained herein, certain statements
included in this report may constitute "forward looking" statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
related to the Company that involve risks and uncertainties including, but not
limited to, quarterly fluctuations in results, the management of growth, market
acceptance of certain products, impact of Year 2000 compliance, the inability
to predict the outcome of certain litigation matters and other risks. For
further information about these and other factors that could affect the
Company's future results, please see the Company's most recent Form 10-K filed
with the Securities and Exchange Commission. Investors are cautioned that any
forward looking statements are not guarantees of future performance and involve
risks and uncertainties and that actual results may differ materially from
those contemplated by such forward looking statements. The Company undertakes
no obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1999 the Company and certain of its current and
former officers and directors were named as defendants in a
shareholder class action lawsuit filed in the Federal District Court
for the Northern District of Georgia. In general, this lawsuit alleges
various violations of the federal securities laws in connection with
certain statements made by the Company regarding its operations and
prospects during the period from February 4, 1998 to October 1, 1998.
The plaintiff is seeking unspecified money damages together with
interest, attorneys' fees and costs. The Company believes the action
is without merit and intends to defend it vigorously.
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS
<S> <C> <C> <C>
(a) Exhibits
Exhibit 11.1 Computation of Earnings Per Share
Exhibit 27.1 Financial Data Schedule (for SEC use only)
Exhibit 27.2 Restated Financial Data Schedule (for SEC
use only)
(b) Reports on Form 8-K
Form 8-K dated September 30, 1999 reporting under Item 5 and
Item 7 (c) the text of a press release dated September 17,
1999 concerning a shareholder class action lawsuit filed
against the Company and certain of its current and former
officers and directors.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<PAGE> 18
HARBINGER CORPORATION
Date: November 12, 1999 /s/ C. Tycho Howle
-------------------------------- -----------------------------------
C. Tycho Howle
Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1999 /s/ James K. McCormick
-------------------------------- -----------------------------------
James K. McCormick
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 1
EXHIBIT 11.1
HARBINGER CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Basic:
Net income (loss) available to common
shareholders ................................. $ 7,728 $ (23,444) $ 15,346 $ (22,822)
=========== =========== ========== ===========
Weighted average number of common
shares outstanding ........................... 38,607 42,163 38,986 41,691
=========== =========== ========== ===========
Basic earnings (loss) per share ................ $ 0.20 $ (0.56) $ 0.39 $ (0.55)
=========== =========== ========== ===========
Diluted :
Net income (loss) available to common
shareholders ................................. $ 7,728 $ (23,444) $ 15,346 $ (22,822)
=========== =========== ========== ===========
Weighted average number of common
shares outstanding ........................... 38,607 42,163 38,986 41,691
Effect of potentially dilutive stock options and
warrants 2,205 -- 1,435 --
----------- ----------- ---------- -----------
Weighted average number of common
shares outstanding assuming dilution ......... 40,812 42,163 40,421 41,691
=========== =========== ========== ===========
Diluted earnings (loss) per share ............. $ 0.19 $ (0.56) $ 0.38 $ (0.55)
=========== =========== ========== ===========
</TABLE>
Computational Note:
In connection with the computation of diluted earnings per share for
the quarter and nine months ended September 30, 1998, all common share
equivalents have been excluded because their impact on the Company's net loss
per share is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,706
<SECURITIES> 57,491
<RECEIVABLES> 51,812
<ALLOWANCES> 4,725
<INVENTORY> 0
<CURRENT-ASSETS> 121,082
<PP&E> 54,321
<DEPRECIATION> 27,653
<TOTAL-ASSETS> 167,061
<CURRENT-LIABILITIES> 47,289
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 119,768
<TOTAL-LIABILITY-AND-EQUITY> 167,061
<SALES> 31,736
<TOTAL-REVENUES> 113,142
<CGS> 3,626
<TOTAL-COSTS> 37,911
<OTHER-EXPENSES> 62,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,929
<INCOME-TAX> 939
<INCOME-CONTINUING> 13,990
<DISCONTINUED> 1,356
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,346
<EPS-BASIC> .39
<EPS-DILUTED> .38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,987
<SECURITIES> 66,579
<RECEIVABLES> 38,815
<ALLOWANCES> 9,724
<INVENTORY> 0
<CURRENT-ASSETS> 143,726
<PP&E> 41,769
<DEPRECIATION> 20,150
<TOTAL-ASSETS> 183,308
<CURRENT-LIABILITIES> 64,023
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 119,281
<TOTAL-LIABILITY-AND-EQUITY> 183,308
<SALES> 34,772
<TOTAL-REVENUES> 98,650
<CGS> 2,839
<TOTAL-COSTS> 27,075
<OTHER-EXPENSES> 89,287
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> (13,932)
<INCOME-TAX> 705
<INCOME-CONTINUING> (14,637)
<DISCONTINUED> (8,185)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,822)
<EPS-BASIC> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
