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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum -- Ignore unavailable to you. Want to Upgrade?

To: lee kramer who wrote (5874)	3/5/2001 10:02:38 PM
From: puborectalis	Read Replies (1) \| Respond to of 6445

Veritas Says It's Beating the Slowdown by Thinking Small By Joe Bousquin Senior Writer 3/5/01 9:11 PM ET Veritas (VRTS:Nasdaq - news) is no Oracle (ORCL:Nasdaq - news). And that's probably a good thing. Just days after Oracle creamed Wall Street with an earnings warning, Veritas said its quarter was going just fine, thank you very much. The data storage and recovery software maker said its numbers should be OK even if a bunch of customers walk away from deals at the last minute. In case you've been vacationing in the Andromeda Galaxy, that's exactly what Oracle said happened to it. "Our expectations are set down on [sales] closure rates," said Gary Bloom, Veritas' chief executive, on a conference call with financial analysts. "But we have enough out there that we feel even with a lower closure rate, we would continue to do very well We're very confident that we can meet the guidance given." Veritas' stock reacted well to the news, rising to $63.13 in after-hours trading on Island ECN. During the regular session, it fell $3.81, or 6%, to $59.81. Analysts expect Veritas to earn 19 cents per share on revenue of $383.4 million, according to multex.com. Bloom said international expansion should fuel Veritas' sales growth. But he also said that at home, his company doesn't face the same hurdles that behemoth Oracle does, because his software doesn't sell for as much. "I have a little insight into the Oracle world, and when they talk about big deals, and we talk about big deals, there's a slight difference in the order of magnitude," said Bloom, who was Oracle's heir apparent until he left to run Veritas last November. "When we're talking about a big deal, it's a million-dollar deal. I've even heard some of our sales reps talk about $500,000 as a big deal. I don't think the approval levels are quite as high as what you would see at Oracle." Although Oracle doesn't release an average deal size, revenue for Oracle's March quarter should come in around $2.67 billion, or seven times more than what analysts expect from Veritas. Executives also said they don't depend on last-minute deals. While Mark Leslie, Veritas' chairman, said at a recent investment conference that the last month of a quarter is typically the company's biggest-revenue month, Veritas' CFO said that title went to the company's middle month in a quarter. "We previously commented that January was a great month for the company, and that trend continued through February," said Ken Lonchar, Veritas' CFO. "In our business model, the middle month of a quarter is typically our largest revenue month. Our normal revenue linearity remains intact this quarter, and I believe the middle month [February] again will be the largest revenue month." When Oracle warned last week, it said one of its problems was getting CEOs to sign on the dotted line. Bloom contended that Veritas wouldn't have the same problem because of its smaller size. "People are asking questions about how things are getting pushed up to the CEO level," said Kevin Hunt, an analyst with Thomas Weisel Partners who rates Veritas a buy. "If things get too big, they're going up higher and higher in the organization. So right now, if it's smaller, it is easier to sell." (His firm hasn't done any underwriting for Veritas.) Hunt especially liked Veritas' approach when it came to closure rates. He said that left room for the company to surprise Wall Street to the upside if things aren't as dour as some people think. "What they're saying is, We're planning for a lower closure rate. But it didn't sound like there was, in fact, going to be a lower closure rate. So if there isn't, then it could be an outsized quarter." On the conference call, Bloom said the company hadn't seen "any erosion in the ability to get deals closed at this stage." Of course, investors should be leery of any claims that software companies make right now. After all, Oracle was making confident comments about its own quarter just days before it had to issue its warning. By being smaller, Veritas is saying that it can duck away from having to do the same. That all depends, of course, on how much smaller the economy becomes, as well.