RSA Security Misses Estimates, Says Second Quarter Still Weak

The security software company also rescinded its guidance for the full year.
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Security software maker

RSA Security

(RSAS)

reported revenue and earnings that fell short of estimates revised after its April 1 warning, and took guidance down for the second quarter.

Bedford, Mass.-based RSA Security reported a first-quarter loss of $13.7 million, or 24 cents a share, compared with net income of $9.8 million, or 16 cents a share, in the same period a year earlier. RSA said first-quarter revenue totaled $55.5 million -- a 27.3% decline from a year earlier. RSA's revenue declined sequentially by 11.9%.

Excluding items, RSA said it lost 11 cents a share, compared with pro forma net income of 16 cents a share a year ago.

Wall Street was expecting RSA to report a pro forma loss of 10 cents a share on revenue of $57 million, according to Thomson Financial/First Call.

RSA announced April 1 it would miss Wall Street estimates, which at that time called for earnings of 2 cents a share on $64.6 million in revenue, according to Thomson Financial/First Call. The company told investors to expect revenue ranging from $55 million to $56 million and a loss ranging from $14 million to $16 million, or about 24 cents to 28 cents a share. Excluding items, RSA said it expected a loss of 8 cents to 11 cents a share.

The company originally forecast revenue of $63 million to $65 million, and earnings of 1 cent to 3 cents a share.

RSA said in a press release after markets closed Thursday that it expects sequential flat to slightly increased revenue for the second quarter and a second-quarter pro forma loss of no more than 4 cents to 6 cents a share.

That's a big drop from guidance in January, when the company said it expects to report pro forma earnings of between 4 cents and 7 cents a share in the second quarter on between $67 million and $71 million in revenue. RSA CEO and President Art Coviello blamed the company's shortfall on lower-than-anticipated IT spending.

The company also said it was rescinding guidance for the full year, which it provided in January, when RSA estimated 2002 revenue should total between $285 million and $295 million, and pro forma earnings should range from 25 cents to 33 cents a share. The company said that based on the complexity of the selling environment and the economic impact on IT spending, it is not in a position to provide revised guidance for the remainder of the year.

Not all security software makers are suffering as much, however.

Check Point Software

(CHKP) - Get Report

joined RSA in preannouncing disappointing results earlier this month, but

Network Associates

(NET) - Get Report

beat estimates Thursday and

Symantec

(SYMC) - Get Report

did not preannounce its results.

On its fourth-quarter conference call, RSA announced that the

Securities and Exchange Commission

had begun an inquiry into the company's discussion of a change in revenue-recognition methodology, explained in a quarterly SEC filing but apparently not in an earlier press release. The effect of the change was not material and the SEC has not concluded there was any wrongdoing, the company said at that time. On Thursday, the company said it had no update to provide regarding the SEC investigation.

Shares of RSA Security fell 56 cents, or 7.2%, to close at $7.23. After the markets closed, shares sank to $6.25 following the earnings announcement.