Updated from Jan. 19Strong consumer sales propelled Symantec ( SYMC) to a record third quarter, as the antivirus maker beat Wall Street's expectations. The Cupertino, Calif., company posted revenue of $695 million, an increase of 41% over last year, Symantec announced after the closing bell Wednesday. Pro forma net income was $175 million, or 24 cents a share, up from $120 million, or 17 cents a share in the same quarter last year. Analysts polled by Thomson First Call were expecting a profit of 22 cents a share on sales of $665 million. But spurred by aggressive "whisper numbers" circulating on Wall Street, investors were hoping for more. Shares were recently off 64 cents, or 2.6%, to $24.27. Including items, net income for the quarter was $164 million, or 22 cents a share, compared with $111 million or 16 cents a share, last year on a pro forma basis. The weak dollar gave Symantec a $26 million lift; without it, growth would only have been 35%. Looking to the fourth or April quarter, the company told investors to expect revenue to range from $690 million to $710 million. At the midpoint of that guidance, pro forma earnings will be 24 cents a share, the company said. For the same period, analysts were expecting a 23-cent profit and sales of $685 million. When Symantec's merger with Veritas Software ( VRTS) was announced before the market opened on Dec. 16, the deal was valued at $13.5 billion, making it the largest-ever software merger, eclipsing the hostile takeover of PeopleSoft by Oracle ( ORCL) for $10.3 billion. Wall Street's reaction to the merger was negative. Since early December, when news began leaking out, Symantec's stock has dropped about 25%, reducing the value of the all-stock deal to roughly $12.2 billion.
ThinkEquity analyst Seihun Kong summed up the concerns of many, saying the merger looks like a defensive move pointing to lower growth, and that slower-growing Veritas would be a drag on Symantec's highflying consumer antivirus business. He said the stock's downward movement after hours was likely the result of investors' disappointment that Symantec didn't hit those so-called whisper numbers recently circulating. Symantec CFO Greg Myers in an interview dismissed speculation that Veritas might look for another buyer before the deal closes. "The critical measure with Veritas is control," he said, referring to Veritas' 39.7% share of the new company. Myers also said that the well-publicized launch of free antivirus software from McAfee ( MFE) via America Online and Microsoft's ( MSFT) antispyware program, has not materially hurt his company. "As their marketing makes noise, we continue to generate revenue," he said. Symantec's consumer business led the quarter's growth, up 49%; it contributed 52% of the company's revenue. The company's enterprise business was also strong, growing 33% year over year. The solid quarter and guidance didn't spur the stock because Wall Street's so-called whisper numbers were a bit higher, said Kong. (His firm has no banking relationship with Symantec.)