Check Point Profit Eases

License revenue falls 16%.
Publish date:

Updated from 9:28 a.m. EDT

Check Point Software's

(CHKP) - Get Report

first-quarter earnings fell 16% from a year ago, weighed down by an expense for stock options.

Check Point earned $61.6 million, or 25 cents a share, in the quarter, compared with $73.7 million, or 30 cents a share, a year ago. The latest period had $11.1 million of options expense. Excluding that and other items, Check Point earned $75.1 million, or 31 cents a share, in the quarter, matching the Thomson First Call estimate.

First-quarter sales fell 3% from last year to $133.6 million, missing the Wall Street consensus of $134.7 million. License revenue fell 16% to $54.8 million, while software subscription revenue rose 7% to $62.5 million. Deferred revenue was $178.9 million at the end of the quarter, up 6% from the beginning of the period.

In a conference call, Check Point said its net income for the second quarter would range from 25 to 28 cents a share.

It expects to earn 31 cents to 34 cents a share, excluding items, in its current quarter, on sales of $137 million to $145 million. Analysts surveyed by Thomson First Call were forecasting earnings of 33 cents a share on sales of $143.7 million.

The company "came in short on the revenue line -- that was the one area of disappointment," said Jerry Ungerman, Check Point's vice chairman. "But there were many other areas of strength that we saw," he said, citing subscriptions and deferred revenue, record cash flow and good results in the U.S. and the Asia-Pacific region.

Check Point said that sales in Japan had room for improvement and that slow top-line growth was an industrywide trend rather than a Check Point-specific issue.

Ungerman added that the failed


acquisition also had an impact on the quarter's performance. He said the aborted deal was "primarily an issue of timing."

Because Check Point was unable to complete the deal in time, Ungerman said, the company withdrew its plans. Asked if the uproar over the Dubai Ports deal had any

impact on the Check Point and Sourcefire merger, Ungerman said, "We're not sure, maybe."

He said the company is continuing to work with the government and that an acquisition in the future was a possibility.

In a conference call earlier Monday, Check Point CEO Gil Schwed said that he didn't believe that "there's any constraint on our ability to acquire U.S.-based companies, and actually we've developed good relationships with certain agencies of the U.S. government, so we know better now how to address many of the issues and how to work these things out better."

In recent after-hours trade, shares were off 5 cents to $19.25; the stock closed up 11 cents to $19.30.