Profit Surges at McAfee

The company blows away earnings estimates.
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Updated from 4:28 p.m. EDT

McAfee

(MFE)

posted second-quarter results Thursday that blew past expectations as sales climbed 32% and earnings more than quadrupled.

McAfee also raised its outlook for the full year, although its third-quarter earnings guidance was just shy of analysts' estimates.

The strong quarter sent shares up to $30.15 in recent after-hours trading, building on a gain of 69 cents, or 2.4%, to $29.59 during the regular session. The stock already has climbed a hefty 68% from its 52-week low of $17.25 as

investors have come around to the company's turnaround strategy, which has included shedding three underperforming businesses.

The Santa Clara, Calif.-based antivirus software maker reported net income of $41.7 million, or 25 cents a share, in the second quarter, which ended June 30. That was more than four times net income of $10.2 million, or 6 cents a share, in the same period a year earlier.

Excluding charges, McAfee earned pro forma net income of $51.6 million, or 31 cents a share, in the second quarter, compared to pro forma net income of $15 million, or 8 cents a share, a year earlier. Analysts were expecting the company to bring in earnings per share of 25 cents, according to Thomson First Call, and the company forecast earnings excluding charges of 24 cents a share.

McAfee's revenue rose 8.7% to $245.4 million from $225.7 million a year earlier. That topped the consensus estimate of analysts calling for $227.9 million in sales and the company's guidance calling for sales of $220 million to $230 million.

Excluding the three businesses sold within the past year and a half, McAfee's new revenue in the quarter actually grew 32% from a year ago, the company said. Bookings increased 19%, and consumer revenue grew 69% from a year ago to $116 million.

McAfee's online consumer services added 2.1 million net new subscribers in the quarter, bringing the total to more than 13.1 million. Revenue from the online consumer services in the quarter grew 90% from a year ago.

McAfee expects third-quarter revenue to range from $225 million to $245 million and fourth-quarter earnings of 28 cents based on the midpoint of the sales guidance. Analyst estimates last called for McAfee to post $238.7 million in sales and 29 cents a share in earnings in the third quarter.

McAfee raised its full-year guidance by $25 million to a range of $980 million to $1 billion for sales and by a nickel for non-GAAP earnings between $1.20 and $1.25. Analysts' last estimates called for earnings of $1.17 a share on $969.4 million in sales for 2005.