Internet Security Systems Beats Estimates

But profit falls from a year earlier.
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Updated from 4:38 p.m. EDT

Internet Security Systems

(ISSX)

on Tuesday beat the Street's first-quarter earnings estimates while posting revenue essentially in line with expectations.

The security software maker earned $7.05 million in net income, or 15 cents a share, for the quarter, falling from $7.8 million, or 16 cents a share, in the first quarter of 2005.

Excluding items like stock-based compensation expenses and amortization of intangibles, the company earned $10.3 million, or 22 cents a share. A year ago, the company made $9.4 million, or 20 cents a share.

Revenue totaled $80.8 million. For the same quarter last year, ISS collected $76.8 million on the top line.

Consensus estimates from Thomson First Call pegged the company to deliver 20 cents a share on sales of $80.9 million.

"Overall I would say we thought market conditions were pretty solid for selling to the enterprise in the first quarter," said Thomas Noonan, president and CEO of Internet Security Systems. "We saw good strong consistent demand. We haven't seen the slowdown (that other security companies have experienced) in our segment of the market -- the large and medium enterprise businesses."

He was particularly pleased because the first quarter is also historically slower for companies like ISS, as customers are getting their budgets in line for the year but not necessarily making purchases yet.

Noonan said that its second-generation Proventia system launched ahead of schedule in March and the company is looking forward to the launch of its on-demand service for the Proventia platform this quarter.

"Our first quarter financial results show the new products, particularly the Proventia Intrusion Prevention System, driving increased revenue, appealing to new customers, gaining market share, and performing well in the industry," Noonan said in a statement accompanying the results.

"In general, the financial results reflect the movement away from legacy products toward the platform model, which we strongly believe is the future of security," he added.

For the current second quarter, ISS expects to earn 13 cents to 15 cents a share. It forecast its non-GAAP net income in the range of 21 cents to 23 cents a share.

Revenue for the second quarter will be between $84 million and $87 million.

That's on target with Thomson First Call analysts' forecast of an EPS of 22 cents on revenue of $85.9 million.

For the full year, ISS said revenue would range from $358 million to $368 million. Net income for the full year is forecast between 66 cents and 72 cents a share. Non-GAAP EPS will range from 94 cents to $1.

Analysts were expecting earnings before items of 97 cents a share on revenue of $357.8 million.

In after-hours trading, shares were up by a penny to $21.52. The stock closed the regular session of trading down 3 cents to $21.51.