VERITAS GUIDANCE SPOOKS STREET
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Tuesday April 16, 9:31 pm Eastern Time
Reuters Business
Veritas Q1 beats views, forecast sends stock lower
(Recasts, adds details, executive and analyst comment)
By Lisa Baertlein
PALO ALTO, Calif., April 16 (Reuters) - Veritas Software Corp. (NasdaqNM:VRTS - news) on Tuesday posted better-than-expected first-quarter profits, but investors shaved 20 percent off the company's stock price after it issued a disappointing outlook for the current selling period.
Veritas shares, which had finished the regular Nasdaq session higher at $36.86, fell to almost $29 in extended trade on the heels of the storage software maker's forecast for weak-to-flat results in the normally stronger second quarter ending June. The stock eventually rebounded to around $30.
``The guidance scared the heck out of me ... It brings up the question of whether we've truly hit bottom yet,'' Goldman Sachs analyst Tom Berquist told Reuters.
He said many investors came to see Veritas as a ``safety stock'' after the company's disaster recovery and other storage products grabbed the attention of corporate decision makers in the wake of the Sept. 11 attacks on the Pentagon and World Trade Center.
Other large sector players, including database giant Oracle Corp.(NasdaqNM:ORCL - news) and business automation software vendor PeopleSoft Inc..(NasdaqNM:PSFT - news) recently have blamed weak corporate technology spending for big declines in their own software sales.
Veritas shares have traded in a range of $17.30 to $80.05 over the last 52 weeks. The stock is down nearly 20 percent year-to-date.
Q1 RESULTS STRONG
News that Veritas' first-quarter pro forma profit came in 3 cents ahead of its own guidance took a back seat to company's short-term view on the tech spending environment.
The Mountain View, California, company posted a pro forma profit that slipped to $66 million, or 16 cents per diluted share, from a pro forma profit of $87 million, or 21 cents, in the year-earlier quarter.
Total quarterly revenue of $370.4 million was down from $387.4 million last year. Nevertheless, it landed at the high end of the company's recently raised estimates on strong sales to U.S. and state government agencies and joint deals with services providers such as International Business Machines Corp.(NYSE:IBM - news) and Electronic Data Systems Corp.(NYSE:EDS - news)
Veritas posted first-quarter net income of $44.5 million, or 11 cents per diluted share, versus a net loss of $156.1 million, or 40 cents, a year ago. The improvement reflected new accounting guidelines, which no longer require companies to regularly book large charges related to the amortization of goodwill.
GUIDANCE SPOOKS STREET
Veritas Chief Executive Gary Bloom told Reuters that the company decided to issue ``conservative'' guidance after it saw momentum slow in the final weeks of the first quarter.
During their conference call with analysts, company executives said Veritas customers downsized big deals in March and focused on purchases that would address their immediate software needs.
``The (information technology) spending environment remains very, very weak,'' Bloom said.
``We can't judge how long that softness will last or if it's a trend. We don't want to be in the guessing game,'' Bloom told Reuters.
To that end, Veritas forecast second-quarter pro forma earnings of 12 cents to 15 cents a share on revenue of between $340 million and $370 million.
Analysts' consensus forecast had been for earnings of 15 cents a share on revenue of $396 million, according to tracking firm Thomson Financial/First Call.
Before the company's conference call, Robert W. Baird & Co. analyst Daniel Renouard said most analysts felt that Veritas had its first quarter in the bag.
After the company issued guidance, Milwaukee, Wisconsin-based Renouard said, ``you could almost hear the sound of the expectations bubble bursting.'' |
