Veritas Holds Steady

Storage software giant overcomes accounting miscue to post sales gains

April 22, 2004

3 Min Read
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A rocky quarter in the executive suite failed to dampen Veritas Software Corp.'s (Nasdaq: VRTS) quarterly software sales.

Veritas beat analyst expectations and its own guidance today when it announced first-quarter income of $103 million, or earnings of $0.23 per share, on revenue of $487 million. Analyst consensus called for EPS of $0.21 on $467 million in revenues.

Veritas easily beat its previous guidance for revenues to fall between $455 million and $470 million, with EPS from $0.18 to $0.21.

For the current quarter, Veritas CEO Gary Bloom gave guidance that placed revenues between $490 million and $505 million, with EPS between $0.21 and $0.23.

Veritas also widened the gap a bit between its new license revenue and maintenance revenue. It reported new license revenue of $303 million, or 60 percent of total revenue, level with last quarter. Meanwhile, maintenance revenue was $183 million, or 38 percent of total revenue, compared to 40 percent last quarter. Veritas license revenue in the quarter was driven by big deals. It reported 25 deals of $1 million or more compared to 12 each in the first and fourth quarters of 2003.Analysts raised concern in the last quarter, when Veritas's maintenance revenue rose at a far greater rate than revenue from new sales, suggesting it had more success with customer renewals than with selling new software (see Veritas Sees No Problem). Veritas execs played down the situation.

Another concern has yet to be put to rest: In March, the company said it would restate its financial reports for 2001 and 2002 and delay its 2003 annual report after an internal investigation turned up accounting irregularities (see Veritas Searches for Truth). CEO Gary Bloom today said the company expected to complete the restatement and become completely compliant with Nasdaq regulations in June.

Company officials can't say how much the restatements will affect revenues until the audit is complete. When announcing the restatements, Veritas said they would likely increase 2001 income by $5 million to $10 million; decrease 2002 income by $5 million to $10 million; and decrease 2003 income by $15 million to $20 million.

"Our ability to balance our efforts is evidenced by our stronger-than-expected results," Bloom said. Bloom also said an upsurge in IT spending helped the company increase revenues in all of its three software categories. Data protection revenue of $162 million rose 13 percent, storage management revenue of $84 million rose 31 percent, and utility computing revenue of $57 million rose 21 percent.

Veritas also changed CTOs for the second time in four years in March, when Fred van den Bosch left (see Veritas Loses CTO Again). Mark Bregman, the executive VP of product operations, took over van den Bosch's duties, but the company has no plans to hire a CTO.Bloom said all indications are that Veritas is holding its market share among storage software vendors – even against Legato, which claims to be gaining share since it was acquired by EMC Corp. (NYSE: EMC) last year (see EMC Earnings Up). Although Veritas still holds a big market share lead over Legato, insiders say EMC's backing is helping Legato pick up reseller support. "There's not a lot of material change in the competitive landscape," Bloom said. "We're not seeing much traction from Legato against our NetBackup [backup software]."

— Dave Raffo, Senior Editor, Byte and Switch

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