VRTS ($38.50~$30.50~$31.50) Veritas Software tanks on Q1 targets
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 11:46 AM ET Jan. 29, 2004
SAN FRANCISCO (CBS.MW) -- Veritas Software's shares fell as much as 16 percent Thursday as investors focused on the company's below-consensus first-quarter earnings target rather than its better-than-expected fourth-quarter results
Gary Bloom, the Mountain View, Calif.-based company's chief executive, said that some investors and analysts got ahead of themselves with their earnings and sales projections for the company's first quarter.
"Shareholders are ignoring very traditional, very seasonal trends in the software industry," Bloom said in an interview. He said most software companies' sales decline about 12 percent from the fourth quarter to the first.
Veritas (VRTS: news, chart, profile) is forecasting about a 10-percent decline, he says. But analysts had expected sales to fall a little less than 6 percent.
Veritas shares dropped $4.99, or nearly 14 percent, to $31.51 after earlier retreating as low as $30.51. The stock is down from a January peak of $40.68, set two weeks ago.
For the first quarter ending Mar. 31, Veritas said it expects to earn 17 cents to 20 cents a share, based on what it earned in the fourth quarter and on the software industry's seasonal first-quarter sales weakness. Sales are expected to fall in a range of $455 million to $470 million.
Analysts polled by Thomson First Call have been expecting the maker of storage-management software to earn 21 cents a share, on average, on sales of about $467 million.
"We may see management become a little less conservative with revenue guidance as the year wears on," said Heather Bellini, analyst with UBS Investment Research, in a note to clients.
Driven partly by a higher-than-average operating margin, the company reported late Wednesday fourth-quarter net income of $105.3 million, or 24 cents a share. Veritas had lost $49.4 million, or 12 cents a share, for the same quarter a year earlier.
Excluding one-time items, Veritas said it earned $109.7 million, or 25 cents a share. On that basis, analysts polled by Thomson First Call had expected the company to earn 24 cents a share, on average.
"Our business overall is very strong, on a year-over-year basis and otherwise, Bloom said. "We've seen growth in all of our product sectors."
Fourth-quarter sales rose to $513 million, up 24 percent from $406 million a year earlier. Veritas saw its license revenue, a key measure of demand for software companies, rise 17 percent to $309 million, while services revenue rose about 44 percent to $204 million.
Veritas reported 12 customer contracts of more than $1 million in the final three months of 2003, down from 15 such deals in the previous quarter. The company also reported 286 deals of $100,000 or more, up from 239 deals of that size a quarter ago.
Deferred revenue from service deals and other contracts from which Veritas has yet to recognize sales rose 24 percent in the latest quarter, to nearly $400 million.
Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com |
