Updated from 11:35 a.m. EDT With a nasty new worm plaguing millions of computers, antivirus software maker McAfee ( MFE) announced after the close Tuesday it had beaten Wall Street's second-quarter earnings expectations and raised guidance for the third quarter. In recent trading, shares of the Santa Clara, Calif., company were up $1.42, or 8.8%, to $17.60. McAfee earned a profit of $15 million, or 8 cents per share, on sales of $226 million in the three months ending June 30. Analysts polled by Thomson First Call were expecting a profit of 6 cents per share and revenue of $203.77 million. A year ago, the company earned a pro forma profit of $20.4 million, or 11 cents a share, on sales of $217 million. On the bottom line, the company earned a profit of $10 million, or 6 cents a diluted share, up fourfold from $2.5 million, or 2 cents a share, last year. McAfee's net income in the most recent June quarter was boosted by a $5.9 million insurance reimbursement related to the settlement of a shareholder lawsuit. Not surprisingly -- given the constant barrage of worms, viruses and spyware -- the company's consumer division performed strongly. Bookings, defined as revenue plus the change in deferred revenue, grew by 123% year over year and 20% sequentially. "But the rest of the business remains a mixed bag," said analyst Joseph Craigen, who follows McAfee for Needham. The small- and medium-enterprise business unit posted its second consecutive sequential decline in bookings of 7%. The large enterprise business saw bookings rebound by 35% but this was after a 37% decline in the first quarter, Craigen said in a note to clients. (Needham does not have a current banking relationship with McAfee.) McAfee raised its guidance for the third quarter of 2004. The company now expects revenue for the third quarter of between $195 million and $200 million and non-GAAP net earnings of 12 cents a share, using its own midpoint. Wall Street was expecting an EPS of 11 cents on sales of $183.20.
The company also intends to call its 5.25% convertible subordinated notes with an anticipated redemption date of Aug. 20, 2004. The total redemption price including accrued and unpaid interest will be about $350 million. The notes are convertible into approximately 19 million shares of McAfee stock.