Another take on VRTS....despite the whipping tone, how many companies came close to these results?
Veritas Raises Hopes, Dashes Them
By Ari Weinberg
Jul 17 2001 05:05 PM PDT
The storage software company came in right on target for the 2nd quarter. Then it lowered its outlook for the year.
When $45 billion storage hardware leader EMC dropped a warnings bomb on the market at the beginning of the month, Veritas, the top storage software player, soothed nerves by saying it was on target for the quarter.
On Tuesday, that changed. In an earnings report that otherwise met expectations, the $20 billion Mountain View, Calif.-based company lowered its full-year revenue growth target to between 25 percent and 35 percent, down from the earlier forecasted range of 35 percent to 50 percent. The revisions suggest a significant slide in growth for Veritas, which posted a 70 percent growth revenue growth rate in 2000.
Pro forma net income for the second quarter came in at $80 million (19 cents per share), directly in line with First Call consensus. Including charges, Veritas posted a net loss of $128 million (32 cents per share), 25 percent better than the same quarter last year. CEO Gary Bloom guided fiscal year earnings per share down to 73 cents to 74 cents per share for the year from current estimates of 84 cents.
"We have to be realistic," CFO Ken Lonchar told The Standard after the earnings release. But Lonchar feels that Veritas' aggressive strategy in the storage software market, which includes healthy research-and-development spending, branching out into international markets and consulting, will keep the firm ahead of competitors such as Legato Systems and Computer Associates.
That realism prompted some investors to unload the stock, sending it down as much as $6.58, or 13 percent, to $43.84 in the late session. The stock had gained 6 percent during the regular session.
The company faulted the weak U.S. economic outlook, but actually trumpeted international growth and strength in its services division, sectors that many other firms have cited as the reason for lower revenue.
Veritas saw services revenue jump to $96 million for the quarter, up from $78 million in the previous quarter and $50 million for the same quarter the year before. Still, total revenue gained just 1 percent quarter-on-quarter despite a 42 percent year-on-year comparison.
"We believe our strategic consulting services helps drive future licensing revenue," Lonchar said. Hopefully so for Veritas, as licensing revenue actually dropped sequentially to $293 million from $309 million.
Both Lonchar and Bloom highlighted the firm's continued R&D spending as a sign that the company will stay on top and come out stronger on the other side of economic weakness. It expects to keep R&D spending at between 15 percent and 17 percent of revenue. This is slightly ahead of the 12 percent spent by Computer Associates in its most recent quarter. And similar to Microsoft's 16.5 percent on R&D spending. |
