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Data Centers

WatchGuard Wades Through Tough Q1

Troubled security vendor's accounting overhaul hits revenues, but M&A speculation sends confusing signals
May 12, 2005

Security vendor WatchGuard Technologies Inc. (Nasdaq: WGRD) announced its first-quarter results today, in a report full of damage control and mixed messages.

WatchGuard posted net revenues of $16.6 million, down from $20.2 million in the year-ago quarter. The results dipped below analyst estimates of $16.89 million (see WatchGuard Announces Q1 ). The company's net loss was $3.9 million, or 12 cents per share, compared to a net loss of $2.7 million, or 8 cents per share, in the first quarter of 2004. This was in line with analyst estimates.

On a conference call last night, WatchGuard execs blamed the performance on first-quarter seasonality in Europe and the companys decision to overhaul its accounting model in some geographies.

The last few months have been tricky for WatchGuard, to say the least. Earlier this year the Seattle-based vendor was forced to postpone its fourth quarter and fiscal year 2004 earnings, due to a series of financial errors (see WatchGuard Postpones Earnings).

Then, during the first quarter, WatchGuard completed its transition to a sell-through revenue recognition model in the U.S., Australia, and New Zealand. However, this reduced revenues by around $2 million.

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