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Firewalls double Check Point earnings

Strong demand for security and firewall products means quarterly earnings that double last year's levels.

Beating analysts' expectations, Check Point Software Technologies (CHKPF) today reported earnings that more than doubled last year's results, citing strong demand for security and firewall products.

The maker of network security software reported net income for the quarter ending June 30 was $7.7 million, or 21 cents per share, compared with net income of $3.2 million, or 10 cents a share in the same quarter in 1996. Wall Street analysts were expecting profits of 16 cents a share, according to First Call.

Check Point's momentum is likely to slow down somewhat, said Gibbs Moody, an analyst at UBS Securities. "No company grows at 134 percent forever, but I think this company can grow at a 60 to 70 percent for the next couple of years."

Revenues for the quarter were $17.3 million, up from $7.4 million for the same period last year.

The company attributes the growth to a combination of strong demand for enterprise-level security solutions and the increased acceptance of its FireWall-1 3.0.

The quarter also set records for Check Point in Europe; the region saw 66 percent quarter-to-quarter growth in bookings. International channel bookings now account for 45 percent of Check Point's total bookings; the remaining 55 percent are attributed to the0 United States.

Moody said he was pleased that the company is growing its revenue streams outside of the United States. He said it was a major driver this quarter and expects that to continue.

This was the first quarter that Check Point's Open Platform for Secure Enterprise Connectivity (OPSEC) framework was available. The company said over 85 companies in of the computer industry have announced support for it, moving it closer to an industry standard for enterprise security.

In the second quarter, Check Point announced new OEM relationships with IBM (IBM) and AST (ASTA) and expanded its existing OEM relationship with Hewlett-Packard (HWP).

Westcon and Ingram Micro (IM) positioned themselves among Check Point's top distributors and resellers. Bookings from these two increased 76 percent over the first quarter. Revenues from SunSoft accounted for 31 percent of overall revenues in the quarter.

A year and a half ago, more than half of Check Point's revenue came from Sun, and that has changed considerably, Moody said. "That is reflected not only in distribution channels, but the company is also working with more OEMs in the past few quarters," which is also helping diversify revenue streams," he said.

A study from International Data Corporation released earlier this month said Check Point holds a 35 percent share of the firewall market share.