Veritas wary as earnings hold steady

The networking software maker posts better first-quarter results than it expected--a modest rise in sales and a slight drop in profits--but says it's still cautious about the next quarter.

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Veritas Software, a leading maker of programs that help companies back up and manage storage networks, reported first-quarter profits slightly below last year's levels and a modest rise in sales.

The Mountain View, Calif.-based company said that it earned $43 million, or 10 cents per share, on revenue of $394 million for the three months ended March 31. That compares with income of $44 million, or 11 cents per share, on revenue of $370 million for the same quarter a year ago.

Excluding amortization, accounting adjustments and other charges, the company would have reported earnings of 17 cents per share, compared with earnings of 16 cents per share a year ago on the same basis. Analysts were expecting earnings of 14 cents a share on that basis, according to tracking firm First Call.

In January, Veritas predicted sales of $370 million and earnings before charges of 13 cents per share.

In a statement Wednesday, Veritas said that its first-quarter profit was ahead of estimates because of higher sales, but warned that sales could drop in the current quarter.

"Although our results for Q1 were better than expected, we remain cautious about Q2 due to the continued challenges in the economy, reduced IT (information technology) spending patterns, and the potential impact of the recent SARS (severe acute respiratory syndrome) outbreak on our Asia Pacific business," CEO Gary Bloom said in a statement.

For the current quarter, Veritas forecast revenue in the range of $370 million to $380 million, with per-share earnings on a standard basis to be either 9 cents or 10 cents. Excluding certain accounting adjustments, the company said it expected earnings of 13 cents or 14 cents.

In an interview, Bloom said that Veritas had strong sales in January and February, but business--particularly direct sales to U.S. corporate customers--slowed down in March. That, in part, is what prompted the conservative outlook for the current quarter, he said.

Asked whether he might be taking too cautious a stance given that Veritas was able to beat estimates last quarter, Bloom said that it remains difficult to forecast business given all of the unusual events affecting the overall economy.

"We also don't want to get ahead of ourselves," he said.

Still, Bloom is quick to highlight that Veritas has not missed estimates since he took the job as CEO. "I'd rather have that as a reputation than the alternative," he said.

Although Veritas was able to grow overall sales from a year ago, the company did post both a sequential and year-over-year decline in what it labels its core markets, as opposed to those that are new or emerging businesses. The company has been aggressively expanding into new areas, such as helping companies manage their data centers from its stronghold of providing backup and recovery software.

However, Bloom said one declining quarter does not mean that growth has ended in the company's core businesses. The company can continue to grow by increasing its sales in various regions of the world and by expanding its software products to more operating systems.

"It doesn't take a growth market for Veritas to grow," he said.