Updated from 9:36 a.m. EDT

Veritas Software ( VRTS) shares slid Wednesday although the software company on Tuesday squeaked past analysts' forecasts and its own recently lowered earnings guidance.

After trading as high as $19.64 earlier following an upgrade to sector outperform from sector perform by CIBC World Markets, Veritas shares were recently down 31 cents, or 1.6%, to $18.73.

The company earned $86 million, or 20 cents a share, in the most recent quarter, compared with earnings of $46 million, or 11 cents a share, last year. Revenue was $485 million, compared with $408 million a year ago, an increase of 19%.

Veritas earned 21 cents a share in its 2004 quarter, excluding items. Analysts polled by Thomson First Call were expecting a profit of 19 cents per share on sales of $479.5 million.

The company preannounced results in early July, lowering its revenue outlook from between $490 million and $505 million to between $475 million and $485 million, citing a steep and sudden drop-off in U.S. enterprise spending over the last two weeks of the quarter. It said pro forma net income would range from 18 cents to 20 cents a share.

On a conference call after the announcement, CEO Gary Bloom said that some customers are apparently postponing new software purchases while they struggle to meet Sarbanes-Oxley compliance deadlines.

Also hurting the quarter's results were a pronounced slowdown in large deals for customers in the United States; in fact, the number of deals over $100,000 slipped to its lowest level in two years. Hefty deals in other parts of the world were stronger, probably because companies outside the U.S. are not required to comply with the Sarbanes-Oxley Act, Bloom said.

User license fees, a measure of new business, increased by 6.7% to $269.9 million during the quarter, while deferred revenue -- for Veritas a reflection of software renewals -- jumped from $297 million to $423 million, an increase of 42.4%.

Looking forward to results for the third quarter, the company told investors to expect pro forma earnings of 20 cents to 22 cents a share on revenue ranging from $485 million to $505 million. Wall Street was expecting a per-share profit of 19 cents and revenue of $484.94 million.

Bloom said he believes that customers will follow a more normal buying pattern in the third quarter.

The company also said its board authorized the repurchase of up to $500 million of its stock over the next 12 months to 18 months.

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