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Veritas flies past 4Q estimates; raises 2001 targets

Veritas Software stormed past analysts’ estimates in its fourth quarter Wednesday and raised its sales and earnings guidance for fiscal 2001.

In the quarter, Veritas earned $83.9 million, or 19 cents a share, on sales of $370.1 million.

First Call Corp. consensus expected the data storage and management software developer to earn 17 cents a share on sales of $344.8 million.

Veritas (Nasdaq: VRTS) shares closed off 94 cents to $104.06 ahead of the earnings report before moving up to $104.44 in after-hours trading.

The $370.1 million in sales represents a 64 percent improvement from the year-ago quarter when it earned $50.7 million, or 12 cents a share, on sales of $226.2 million.

For the fiscal year, it earned $263 million, or 60 cents a share, on sales of $1.2 billion, up 72 percent from fiscal 1999 when it raked in $70.3 million, or 16 cents a share, on sales of $317.2 million.

During a conference call with analysts, Chief Financial Officer Ken Lonchar said the company sees no slowdown heading into fiscal 2001.

Lonchar told analysts to expect first-quarter earnings of at least 20 cents a share, up from the current estimate of 18 cents.

Sales for fiscal 2001 are expected to be $50 million to $100 million above the current estimate of $1.72 billion and earnings will come in around 89 cents a share, up from the First Call Corp. consensus estimate of 84 cents a share.

“No matter how you slice it, our business was strong across all categories this quarter,” said Chief Executive Officer Gary Bloom. “I’ve only been here since December but I can tell you I like what I see.”

Licensing sales accounted for $301 million in the quarter while services contributed $68.8 million.

Gross profit margins in the quarter came in well above analysts’ estimates at 89.9 percent. Veritas expects margins to fall between 87 percent and 90 percent in fiscal 2001.

Operating profit in the quarter jumped to $119.4 million, up 55 percent from the year-ago quarter and 17 percent sequentially.

Operating margins in the quarter came in at 32.3 percent.

Veritas exited the quarter with more than $1.25 billion in cash and short-term investments.

Ahead of the earnings report, Shebly Seyrafi, an analyst at A.G. Edwards, predicted the company would earn 18 cents a share on sales of $364 million.

“As far as IT spending goes, we’re not seeing a slowdown in the storage sector,” he said. “Quite frankly, as we’ve seen from Veritas, Emulex and EMC, storage is now immune to the slowdown.”

Lehman Brothers analyst Neil Herman predicted Veritas would beat the Street estimate by a couple cents a share and raise guidance for fiscal 2001.

“While concerns over declining IT spending patterns remain, we believe that the available monies being spent are for “must-have” and mission-critical software, which include Veritas’s data availability products,” he wrote in a research report.

EMC (NYSE: EMC) and Emulex (Nasdaq: EMLX) both reported strong results in their latest quarters as well as robust outlooks for fiscal 2001. EMC told investors that it was comfortable with fiscal 2001 sales estimates of around $12 billion.

“These stocks in the storage space are the babies you don’t want to throw out with the bathwater,” Seyrafi said.

Veritas shares moved up to a 52-week high of $174 in March before fading to a low of $64.44 earlier this month.

Eighteen of the 20 analysts tracking the stock rate it either a “buy” or “strong buy.”