CNET también está disponible en español.

Ir a español

Don't show this again

Christmas Gift Guide
Tech Industry

Check Point beats estimates

Security specialist touts big deals, but an analyst says the company's revenue from new licenses wasn't strong enough.

Check Point Software has reported second-quarter results that beat Wall Street's estimates, in part from large deals that were landed and greater belt-tightening.

The security software giant on Tuesday reported revenue of $144.6 million in the quarter ending June 30, up 14 percent from the same period a year ago. Wall Street was expecting the company to report revenue of $144.3 million, according to Thomson Financial.


Roundup

Get all the latest
earnings news about
the tech industry's
top players.

Check Point reported net income of $78 million, or 31 cents a share, in the quarter, up 23 percent from the previous year. Excluding charges related to acquisitions, Check Point posted a profit of 32 cents a share. Wall Street had expected the company to report earnings of 30 cents a share, according to Thomson Financial.

"The activity level was high and the channel remains engaged," said Gil Shwed, Check Point chief executive.

During the quarter, large deals of over $50,000 represented 30 percent of revenue--up from accounting for 24 percent in the first quarter. And five of these deals were multiyear, multimillion-dollar agreements, Shwed noted.

"The five large deals fell into our full spectrum of products. It was very diverse," Shwed said. "One large deal was for new products, another was a technology licensing one, and another was in our core market to build a VPN."

New products accounted for 30 percent of the company's revenue. During the quarter, Check Point introduced its NGX platform, which serves as a unified security architecture. The company also introduced a wireless security appliance for its Check Point VPN-1 Edge product line.

Check Point said it expects to land more large deals in the third quarter, but Shwed noted this period tends to be more challenging.

"We expect large deals to continue in the third quarter, but it's a sensitive quarter because customers will push back orders to the fourth quarter," Shwed said. "But we still think the third quarter will be better than the third quarter of last year."

Check Point expects to generate between $140 million and $150 million in revenue during the third quarter. And it expects to maintain its previous forecast for the full year, with revenue reaching between $585 million and $600 million.

Some analysts, however, were not that impressed with Check Point's performance.

"It wasn't a bad quarter, but they didn't blow it away," said Peter Kuper, an analyst with Morgan Stanley. "Investors will be looking at Check Point's (earnings per share) but don't realize it was achieved by buying back stock and trimming expenses. It wasn't through strong sales growth."

New licenses grew 5 percent in the quarter to $71.2 million, compared with 4 percent growth in the first quarter. But during the company's analyst day earlier in the year, Check Point had forecast 16 percent growth in new licenses for the year.

"Unless they have 25 to 30 percent growth for the rest of the year, they can't get to 16 percent," Kuper noted.

Kuper also noted he was concerned about the status of Check Point's deferred revenues, in light of the megadeals the company is signing.

"If they're signing all these megadeals, why is deferred revenues up only 3 percent sequentially in the quarter?" Kuper asked. "If they're signing all these longer-term contracts, they need to show stronger growth on their balance sheet."

During the rest of the year, Check Point largely plans to focus on developing NGX upgrades to its existing product line, rather than churning out new product lines, Shwed said.

The company will also concentrate on executing on its current product portfolio, rather than shopping around for acquisitions. Said Shwed: "We don't see many holes in our product portfolio."