ArcSight Looks for Q3 Sales Growth

CUPERTINO, Calif. (TheStreet) -- Banking on its increasing business with the government, security software maker ArcSight(ARST) is expected to continue its sales momentum when it reports its third-quarter results after market close.

The rising star of I.T. security, ArcSight has repeatedly been cited as an attractive stock for investors.

Cybersecurity is big news, and ArcSight could be in for some big payouts. The U.S. government alone is expected to increase its IT security spending from $7.9 billion in 2009 to $11.7 billion in 2014.

The Silicon Valley firm, which competes with Symantec(SYMC) and EMC(EMC), is gearing up for a major federal push. ArcSight recently appointed Prescott Winter, the former CIO of the National Security Agency, to serve as CTO of its public sector division. ArcSight CEO Tom Reilly also spent six weeks in Washington during the fall to forge even tighter government ties.

Analysts surveyed by Thomson Reuters expect ArcSight to post revenue of $45.41 million, up from $34.4 million in the prior year's quarter. Excluding items, however, the company is expected to earn 16 cents a share, down from 21 cents a share in the same period last year.

Investors are nonetheless warming to ArcSight's story, and the company's stock rose $1.02, or 3.73%, to $28.35 on Thursday, far outpacing the Nasdaq, which crept up just 0.01%.

ArcSight's shares have climbed more than 225% in the last 12 months, and the software maker recently outlined plans to boost its operating margin. After achieving a 14% margin in fiscal 2009, the company is aiming for an 18% to 20% operating margin by fiscal 2012. During its analyst day in October, the company also vowed to boost its international business.