Shares of McAfee ( MFE) surged Friday after it reported strong third-quarter results on strong sales of its security software. The company's results, which were reported late Thursday, were closely watched by industry watchers after McAfee's rival Symantec ( SYMC) had reported sluggish growth earlier this week in its security business. Symantec also issued cautious third-quarter guidance, prompting speculation that security software may have lost its "recession-proof' reputation. McAfee's strong results boosted its shares 9% in early trading Friday. The software company's third-quarter revenue was $409.7 million, up 27% from the same period a year ago, and well above analyst estimates of $395.21 million. The firm also issued an optimistic fourth-quarter guidance Thursday, indicating strong demand for its products during the coming months. Fourth-quarter revenue is expected to be between $400 million and $420 million, compared to the consensus estimate of $405.5 million. The company also expects fourth quarter net income of 54 to 60 cents a share. Its adjusted earnings are expected to between 50 cents and 56 cents a share, compared to analysts' estimate of 52 cents a share. McAfee's shares rose $2.50, or 9.01%, to $30.25, Friday. Despite an increasingly uncertain economic climate, McAfee experienced strong third-quarter growth in its North American and consumer businesses, which helped boost revenue. Sales of McAfee's software in North America grew by almost a third compared to the same period last year, accounting for more than half of the company's total revenue. McAfee's consumer products also enjoyed good growth, with sales up 20% on the prior year.
"Security spending remains a priority for customers," said McAfee CEO Dave DeWalt in a conference call Thursday. "
Security software is a technology must-have." McAfee executives added on the conference call that an economic slowdown typically results in an upsurge in malicious activity, particularly identity theft. McAfee is one of the tech companies that is expected to benefit from the upheaval in the financial sector. DeWalt also attributed the company's third-quarter performance to the recent expansion of its sales force, as well as enhancements to the company's reseller strategy. Despite strong revenue growth, McAfee's profit dipped to just under $49 million, or 31 cents a share, compared to $63.4 million, or 39 cents a share, in the same period last year. The results, however, were affected by a $12 million impairment charge related to the credit crisis. Excluding charges, McAfee reported third quarter profit of $82.2 million, or 53 cents a share, up from $72.4 million, or 44 cents a share, a year ago. Analysts had estimated earnings of 49 cents a share. "McAfee reported strong 3Q08 results squashing concerns that arose following Symantec's quarter and subdued outlook," wrote Todd Weller, infrastructure software analyst at Stiefel Nicolaus, in a note released Friday. Weller reiterated his "buy" rating and $40 McAfee price target. The analyst added that McAfee's "stronger execution" is helping gain market share from Symantec and other security rivals such as Microsoft ( MSFT).