Symantec posts Q1 profit on strong consumer sales

By Elinor Mills Abreu

SAN FRANCISCO: Symantec Corp., a leader in computer security products and services, on Wednesday swung to a first-quarter profit, exceeding its own guidance as it cited unexpectedly strong consumer sales of anti-virus software.

The company also announced the acquisition of privately held security providers Recourse Technologies, Riptech Inc. and Securityfocus, for a total of about $355 million in cash.

Symantec had strong sales in all geographies, with sales to corporations rising 35 percent on the year and consumer anti-virus sales up 133 percent, John Thompson, chairman and chief executive, said in an interview.

For the fiscal first quarter ended June 30, Symantec posted a net profit of $56.6 million, or 36 cents a share, compared with a net loss of $21.2 million, or 14 cents per share, a year earlier.

Revenue for the first quarter rose to $316 million from $228 million a year earlier, according to the Cupertino, California-based

Analysts polled by Thomson First Call on average expected the company to post a profit of 32 cents per share, excluding company.items, on revenue of $284.28 million, for the quarter.

"We do not expect this kind of strength to continue in the consumer segment," Thompson said during a conference call with analysts.

The company expects to post revenues of $300 million to $310 million for the second fiscal quarter, said Greg Myers, chief financial officer. Earnings per share, excluding items, are expected to be 30 cents for the second quarter, at the mid-point of the revenue guidance, he added.

For the full fiscal year, Symantec expects to post revenue of $1.31 billion, up from the previous guidance of $1.2 billion to $1.25 billion, and earnings per share, excluding items, of $1.42, as previously forecast, Myers said.

Four acquisitions this month

While the new acquisitions are expected to dilute earnings per share by 12 cents over the next 12 months, operating performance improvements should make up for that so the company is not lowering full-year guidance, he added.

About two weeks ago, Symantec announced the acquisition of Mountain Wave Inc., a privately held provider of corporate security management software and services, for $20 million cash.

Asked if Symantec planned more acquisitions, Thompson said the priority in the short-term would be to integrate the new companies.

The acquisitions will broaden Symantec's already diverse offering of security services and software. Recourse Technologies sells network intrusion detection products; Riptech offers managed security services; and SecurityFocus offers a vulnerability database and an early warning threat management service, the company said.

The deals will propel Symantec into a leadership position in threat management, said Pete Lindstrom, director of security strategies at research firm Hurwitz Group.

"This almost forces a move by ISS (Internet Security Systems Inc.) and/or Network Associates Inc.," its prime rivals, he said.

Excluding one-time charges related to restructuring and other items and amortization of acquisition-related intangible assets, the company posted pro forma profit of $65.6 million, or 41 cents a share, compared with a profit of $33.9 million, or 22 cents a share, a year earlier.

In June, Symantec executives said they expected sales to come in at the high end of their guidance of $280 million to $290 million and reiterated earnings per share guidance of 32 cents, excluding items.

Shares of Symantec closed at $33.10, up 1 percent, or 33 cents, on the Nasdaq stock exchange, but fell to $31.70 in after-hours trade on Instinet. The stock has risen 67 percent over the past year while the Nasdaq Index has dropped 32 percent and the Dow Jones U.S. Software Index has dropped 40 percent.

© Reuters