Updated from 5:35 p.m. ET
, the Silicon Valley data storage software company, easily surpassed Wall Street's fourth-quarter revenue and earnings expectations Wednesday while bumping up revenue and earnings guidance for 2001.
The company, which has a $42 billion market capitalization, had income excluding charges of $83.9 million, or 19 cents per share, on revenue of $370.1 million. Analysts were expecting the company to earn 17 cents per share on revenue of $347 million, according to
. For the same quarter a year ago, the company earned 12 cents per share on $226 million in revenue.
"We concluded the year with record revenue and we are very optimistic about our growth potential for 2001," Gary Bloom, who
recently took over as Veritas' CEO, said in a statement.
Those results were exactly what Veritas needed to help justify its lofty stock price. Like many enterprise, or business, software companies, its shares are richly valued. It traded Wednesday at around 124 times 2001 earnings estimates.
The company also helped its case when it increased its guidance on its conference call. For the first quarter, it said it expects earnings about 2 cents a share above expectations, which are at 18 cents. The company also said revenue would grow 4% sequentially, which translates into sales of about $385 million. Analysts were forecasting revenue of $370 million.
For the full year, the company said it would grow revenue by 45% to 50%, which would translate to revenue of $1.74 billion to $1.8 billion. It also said that it would probably add 5 cents to the current EPS estimate. Analysts are forecasting $1.7 billion in revenue and earnings of 84 cents per share.
But while a technology company raising guidance is unusual this earnings season, Veritas' new numbers may make growth look a little slower than some investors want after taking the strong 2000 performance into account. For instance, on a sequential basis, Veritas' revenue grew 16% from the third to fourth quarter. So by comparison, the 4% first-quarter growth looks weak. In addition, analysts were forecasting 6.6% growth from the fourth to first quarter, according to
Veritas' stock did little in after-hours trading. After closing down 94 cents at $104.06 during the regular session, it was trading at $105.28 on
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"I think they were expecting a little stronger guidance going forward," said Sarah Mattson, an analyst at
Dain Rauscher Wessels
who rates Veritas a buy. "But if you look at the history of the company, they've always guided to lower growth, especially going into Q1." (Her firm hasn't done underwriting for the company.)
For instance, between the fourth and first quarters last year, Veritas revenue grew 8%, though Mattson said the company offered similar guidance at the time.
Bloom, for his part, disputed the widely held view that technology spending is slowing.
"I think it's unclear whether there is a slowdown, or just a shift and rebalancing in IT spending," Bloom said. When analysts countered that other tech companies had acknowledged that slowdown, Bloom pointed the finger back at them.
"If you remember, the Y2K phenomenon, many of the companies that had bad results said, 'Oh, there's a Y2K slowdown.' I think companies that have other signs of weaknesses now are using IT spending as an excuse."
There were, however, some concerns over Veritas' business outlook because of its ties to one of those slowing companies. Veritas' software, which helps companies manage and retrieve data stored on large networks, is bundled with
missed its revenue projections when it reported quarterly results earlier this month, so analysts have been watching how those slowing sales might affect Veritas.
Veritas said it was difficult to say what Sun's impact might be, but it stressed that Sun wasn't the only partner it had. "We're not counting on any one company to get to our objectives," said Ken Lonchar, Veritas' CFO.
In a research note,
analyst Mark Fernandes estimated that Sun contributed about $80 million to Veritas' $1.2 billion in 2000 revenue. He sees 50% growth in the Veritas storage management software that's based on Sun's
platform, largely because that market is only 30% penetrated. (He rates the company a buy, and his firm hasn't done underwriting for Veritas.)
Noting the stock's high price, though, he also wrote, "While Veritas' fundamentals remain outstanding, we believe that many investors still appear to be cautious about the valuation."
Pru's Breiner, however, likes to keep Veritas' valuation in perspective. Investors are going to have to pay for strong companies that have a good chance of growing in a slowing economy, he said. After all, in the information age, a company's data is one of its most valuable resources. Storing, managing and retrieving that data isn't an option; it's a necessity.
"On a scale of one to 10, this is an eight in terms of importance. It's very high on the nondiscretionary spending list," Breiner says. "The data has to go someplace, and regardless of the economic environment, you have to keep your systems up and serve your users. The drivers are fairly enduring."