Analysts say Morgan call on Veritas flawed
PALO ALTO, Calif., Aug 15 (Reuters) - An analyst on Wednesday said that Morgan Stanley erred in a note that called into question the second-quarter performance of a key product set at Veritas Software Corp. (NasdaqNM:VRTS - news)
Responding to a client note in which Morgan Stanley analysts Joseph Farley and Charles Phillips said the data management software company may have seen license revenues from its key clustering and replication products decline from the first-quarter and year-ago periods, Banc of America Securities analyst Greg Vogel said it appeared that the analysts had not made a so-called apples-to-apples comparison.
``I don't think there is anything funny going on here,'' Vogel told Reuters.
Veritas declined comment through a spokesman, who said that Veritas Chief Executive Gary Bloom and Chief Financial Officer Ken Lonchar were not available for comment.
The Morgan Stanley analysts said that clustering and replication revenues, which have posted triple-digit gains in the past and were broken out in earlier reports, were not listed separately when the company reported on July 17 that second-quarter revenues grew 42 percent year-on-year to $390 million.
Working from documents filed with the U.S. Securities and Exchange Commission, the Morgan Stanley analysts broke out revenues along company-described product lines and reached the conclusion that clustering and replication revenues were showing weakness.
``If our reading of these items is correct, and our arithmetic is accurate, then it appears as if at least one of Veritas' core product franchises is struggling, perhaps more than originally believed,'' the analysts said.
They cautioned that their conclusion could be flawed if Veritas reclassified its clustering and replication revenues and included those sales with other products. They said, however, that the company did not appear to have detailed or specified such a reclassification in public disclosures.
They also noted that ``we have little objective evidence pointing toward any softness in demand for the clustering and replication products in this most recent quarter.''
Vogel said Veritas changed auditors -- from Ernst & Young to KPMG -- in the second quarter and that there had been a ``bit of a reclassification'' of product revenue.
According to Banc of America estimates, Veritas had second-quarter clustering and replication revenue of $53 million -- a 15 percent increase over the previous quarter and a 43 percent improvement from the year-ago quarter, Vogel said.
Morgan Stanley analysts were not immediately available for comment. |
