Internet Security Systems Weakens

Shares fall more than 7% after hours.
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Internet Security Systems

(ISSX)

posted second-quarter results late Wednesday that were in line with analysts' expectations, but it indicated that third-quarter earnings could fall short of analysts' estimates.

The security software vendor also maintained its full-year revenue guidance and raised the low point of its earnings guidance by 2 pennies.

Investors recently bid down the shares in after-hours trading by $1.65 to $21.10 after the stock closed up 45 cents, or 2%, at $22.75.

Under generally accepted accounting principles, Atlanta-based ISS reported net income of $8.3 million, or 18 cents a share, in the second quarter, which ended June 30. That was up from net income of $5.5 million, or 11 cents a share, in the same period a year earlier.

Excluding charges, ISS earned pro forma net income of $9.4 million, or 20 cents a share, in the second quarter, compared with pro forma net income of $6.6 million, or 14 cents a share, a year earlier. That was in line with the consensus estimate among analysts polled by Thomson First Call.

ISS, which makes intrusion detection and prevention software, said second-quarter revenue rose 14% to $79.1 million from $69.5 million a year earlier. That fell slightly short of the consensus estimate of analysts calling for $80 million in sales.

The company expects third-quarter revenue to range from $80 million to $84 million, fourth-quarter GAAP earnings to range from 17 cents to 20 cents a share and pro forma earnings of 20 cents to 22 cents a share.

The midpoint of the sales guidance falls largely in line with analyst estimates of $83 million, but the midpoint of earnings guidance falls short of the 21 cents expected by analysts in the third quarter.

For the full year, ISS is expecting revenue in the range of $325 million to $335 million -- in keeping with previous guidance. The company said it expects GAAP net income ranging from 71 cents to 75 cents a share -- a small refinement from a previous range of 69 cents to 75 cents a share -- and pro forma net income of 81 cents to 85 cents a share -- vs. a previous range of 79 cents to 85 cents a share.

Analysts were most recently forecasting pro forma earnings of 84 cents a share on $330 million in sales for the full year.