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Check Point comes out on top

Security firewall vendor Check Point reports fourth-quarter earnings that beat analysts' expectations.

Security firewall vendor Check Point (CHKPF) reported fourth-quarter earnings today that beat analysts' expectations.

The Israel-based software company, which has major U.S. operations, said earnings for its most recent quarter were $14 million, or 37 cents a share, compared with profits of $5.5 million, or 15 cents a share, a year ago. Check Point topped First Call's consensus of analysts' estimates, which pegged earnings at 31cents a share.

The company's revenues for the quarter jumped to $29.5 million, up 155 percent from a year earlier.

Before its earnings report was released, Check Point's stock closed the day at 36-13/16, off 15/16.

Check Point, the largest vendor of firewall software, is considered a bellwether for firewall companies, and, more broadly, for the Internet security sector as a whole. Its status could change, however. A Morgan Stanley Dean Witter downgrade last week cited concerns that networking giant Cisco and software powerhouse Microsoft would move into the Internet security space sooner than expected, encroaching on Check Point's market share.

For calendar 1997, Check Point reported $82.9 million in revenues, a 160 percent increase over the $31.9 million in revenues it reported for the same quarter during the previous year. The company's net income for the year was $40.2 million, or $1.07 per share, compared with $14.2 million, or 43 cents a share, the previous year.

Check Point's upbeat report did have a downside. The company said fourth-quarter bookings were down in Japan and Southeast Asia, which continue to be troubled by currency and other economic woes. The company said more than 45 percent of its sales through distribution channels, excluding original equipment manufacturer (OEM) revenue, came from outside North America.

OEM revenues amounted to 17 percent of overall revenue for the quarter. Sun Microsystems has been Check Point's chief OEM partner, accounting for 12 percent of revenue in the quarter, but the company for the first time also booked revenues from Bay Networks, Hewlett-Packard, and TimeStep.

The company said 54 percent of its sales, excluding the Sun OEM deal, were on Windows NT, the growth platform for firewall sales.