Updated from 4:44 p.m. EST



posted fiscal fourth-quarter results Wednesday that beat analyst targets. The company also raised its 2005 guidance substantially above Wall Street expectations.

Excluding charges, the antivirus-software maker earned non-GAAP net income of $37.6 million, or 23 cents a share, in the fourth quarter, down from non-GAAP net income of $50.3 million, or 27 cents a share, a year earlier. That beat the consensus estimate gathered by Thomson First Call by 1 cent and the company's guidance by 2 cents.

New McAfee revenue was $244.5 million in the quarter, a 28% year-over-year increase excluding revenue generated by parts of the company that were sold off. On an overall basis, however, revenue was down about 10% compared with last year. Still, the company handily beat the consensus estimate of analysts calling for $223.4 million in sales, which was already higher than the company's guided range of $218 million to $222 million.

Under generally accepted accounting principles, Santa Clara, Calif.-based McAfee reported pretax net income of $24.3 million in the fourth quarter, which ended Dec. 31. That compared with pretax GAAP net income of $55.5 million in the same period a year earlier. McAfee released only pretax operating results on a GAAP basis as it continues to evaluate the adequacy of its income-tax payable, deferred taxes and tax-expense balances.

The company expects first-quarter revenue to range from $210 million to $220 million and first-quarter, non-GAAP earnings of 19 cents a share based on the midpoint of the revenue range. Analyst estimates last called for McAfee to post $195.1 million in sales and 19 cents a share in earnings in the first quarter.

McAfee raised guidance for the full fiscal year 2005, projecting a revenue range of $920 million to $960 million, up from a prior range of $820 million to $850 million. The company raised projections for non-GAAP net earnings to between $1.10 and $1.15 a share, up from $1.05 a share.

Analysts were last pegging 2005 sales at $861.4 million and earnings at $1.04 a share.

CEO George Samenuk said the higher 2005 revenue target "sends a signal" that the company believes it will have a strong 2005 no matter what


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"We have been anticipating Microsoft's entry into security for over two years now," Samenuk said.

McAfee and larger rival


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have been under pressure from the likelihood of increased competition from Microsoft. McAfee shares have shed about 16% of their value since Microsoft announced its deal for Giant -- a considerably bigger drop than the roughly 5% decline suffered by the

Nasdaq Composite

during the same period.

Microsoft, the world's largest software maker, plans to give away free antispyware software recently acquired from

Giant Software

and expects to

jump into the consumer antivirus market by the end of the year with a fee-based product.

Samenuk said McAfee is enjoying strength in both its enterprise and consumer businesses, as well as in the small- and medium-size business market in Europe. McAfee consumer revenue grew 49% year-over-year. Revenue from online consumer services grew 73% year-over-year and added 2.1 million net new subscribers in the quarter.

But some analysts have suggested that the antivirus market may be likely to commoditize as Microsoft enters the space. In addition, some Internet service providers have begun offering antivirus products to subscribers for free.

Time Warner's


AOL division, for instance, has decided to foot the bill to give McAfee's security software to its millions of subscribers for free.

However, some analysts believe Microsoft is unlikely to pose much threat in the corporate antivirus arena. And still others continue to suggest that McAfee, often viewed as a turnaround story, remains a possible acquisition target in the consolidating software sector.

McAfee also said it expects to file its 2004 Form 10-K at the end of March -- beyond the mid-March 2005 deadline -- because of compliance issues related to the Sarbanes-Oxley Act. McAfee has found it may have one or more internal control deficiencies related to financial reporting.

Shares of McAfee rose 46 cents, or 1.9%, to close Thursday at $24.64. In after-hours trading, shares recently exchanged hands higher at $25.