Veritas Rides Earnings See-Saw

Things werent quite as bad for Veritas Software Corp. (Nasdaq: VRTS) last quarter as the company thought they'd be three weeks ago (see Veritas Takes a Dive). But things weren't as good as execs thought they'd be three months ago.

Veritas reported financial results today lower than originally forecast last quarter, but with higher net income than the company’s revised forecast issued July 6. Veritas revenue was $485 million, and net income was $91 million, or $0.21 earnings per share. Veritas's earlier warning was EPS of $0.18 to $0.20 and revenues from $475 million and $485 million. Reuters' estimates for Veritas were $479.6 million and $0.19.

In the same quarter last year, Veritas had revenue of $408 million and EPS of $0.19.

Even with the improvement, Veritas CEO Gary Bloom told analysts it was not a good result. “We’re clearly not happy that we came in below expectations,” he said.

Bloom said U.S. sales weakened late in June, but international and channel sales were strong during the quarter. U.S. license revenue was down 6 percent from last year, although overall U.S. revenue was up 9 percent.For the current quarter, Bloom predicted earnings of 19 cents to 21 cents on sales of $485 million to $505 million, and he said the company is still targeting revenue of $2 billion for the year. “The second quarter has not dampened our optimism,” he said. "We expect normal patterns in the third quarter." Analysts' consenus for guidance was $0.21 EPS.

Bloom said large deals decreased, as the company reported 201 deals worth more than $100,000, down from 246 last quarter and 286 in the final quarter of last years. Bloom said he thought compliance with Sarbanes-Oxley played a big role, as companies curtailed spending while they concentrating on reaching compliance (see Another Reason to Hate Compliance).

Indeed, Bloom said Sarbanes-Oxley was diverting "time, attention, and money" from large companies. He also said he thought the storage software market was down across the board, and he saw no substantial shift in market share.

Pointing to a rash of storage companies and other types of software vendors who reported poor performances in the quarter, Veritas CFO Ed Gillis said, "We continue to not believe this is a Veritas-related issue, given the performance of so many other companies."

He cited Veritas’s purchase of storage automation startup Invio Software Inc. as a highlight of the quarter (see IBM, Brocade Tie SAN Knot).— Dave Raffo, Senior Editor, Byte and Switch