UPDATE - Check Point profits dip, rival NetScreen gains
Wednesday January 22, 7:48 pm ET
By Reed Stevenson
(Recasts, adds NetScreen results; previous REDWOOD CITY)
SEATTLE, Jan 22 (Reuters) - Israeli Internet security company Check Point Software Technologies Inc. (NasdaqNM:CHKP - News) reported on Wednesday quarterly profits and revenues fell from a year ago, but topped analysts' expectations.
At the same time, its smaller rival NetScreen Technologies Inc.(NasdaqNM:NSCN - News) reported quarterly revenue rose 76 percent and said it was poised to take market share away from Check Point in the fast-growing market for firewall and virtual private network systems.
Check Point's fourth quarter net profit declined to $64.5 million, or 26 cents per share, from $77 million, or 32 cents per share, a year earlier.
Analyst polled by Thomson First Call had forecast, on average, earnings per share of 24 cents.
NetScreen posted net income of $3.2 million, or 4 cents per share, in the December quarter, the first of its fiscal year, reversing a loss of $34.5 million, or $1.25 per share, a year earlier.
Shares in both companies jumped higher in after-hours trade, lifted by the market-beating results and optimistic growth outlooks from executives at both companies.
Check Point shares were trading at $15.36, up 7.7 percent from the Nasdaq close of $14.26, while NetScreen's shares jumped 13 percent to $19.05 from $16.85.
Both Silicon Valley companies make firewall protection and virtual private network (VPN) systems to block intruders from corporate networks and also compete against networking equipment powerhouse Cisco Systems Inc. (NasdaqNM:CSCO - News)
Rob Thomas, chief executive of NetScreen, said the Sunnyvale, California-based company was able to grow because of steady corporate demand for VPN and firewall systems.
"We're banking on the fact that we can continue to take market share from Check Point," Thomas told Reuters.
OUTLOOK GOOD DESPITE ECONOMY
Amid a weak economy, cost-conscious companies are increasingly turning to VPN in order to cut costs, since they can connect their workers more efficiently over the Internet, rather than setting up expensive internal networks.
According to market researcher Infonetics, global sales of VPN and firewall hardware and software will reach $4.9 billion in 2005 from an estimated $2.7 billion in 2002.
But Check Point President Jerry Ungerman blamed the weak economy for Check Point's revenue and profit declines.
"It was a very difficult time," Ungerman told Reuters.
After seeing revenue decline to $110.3 million in the fourth quarter from $122.5 million a year earlier, Check Point said it now expects revenue in the current first quarter to be between $104 million and $106 million with a profit of 24 cents to 25 cents per share.
In the first quarter of 2002, Check Point, which has headquarters in Tel Aviv and Redwood City, California, had revenue of $104.5 million and earnings per share of 25 cents.
"We see real upside, better economic conditions and a return to some degree of IT spending," Ungerman said.
NetScreen also predicted better growth during the first three months of 2003, and said that revenues would rise 10 to 12 percent from the latest quarter, which saw revenue jump to $51.1 million from $29 million a year earlier.
NetScreen nudged up its sales forecast for the full fiscal year to end-September as well, calling for revenue between $225 million to $230 million from the original projection of $197 million to $208 million.
Excluding stock-based compensation and other items, NetScreen posted a first quarter profit of $10.9 million, or 13 cents per share, well above analysts's forecasts for 7 cents per share and breakeven a year earlier.
"We think that they (NetScreen) are taking market share from Check Point," said Erik Suppiger, networking analyst at Pacific Growth Equities. "Both did post sequential growth, but overall NetScreen is in a better position." |
