Updated from 5:01PM

Veritas Software

(VRTS) - Get Virtus Investment Partners, Inc. Report

, the data-storage software maker that reaffirmed guidance less than two weeks ago, met earnings expectations for the quarter but said future results would not meet projections after all.

The company said earnings, excluding accounting adjustments, came in at 19 cents per share on sales of $390 million during the second quarter. Wall Street analysts were expecting the company to earn 19 cents per share on revenue of $391.3 million, according to

Multex.com

. A year ago, the company earned 13 cents per share on $275 million in revenue.

But, blaming everyone's favorite villain, the economy, Veritas took down its future guidance.

"While we anticipate completing the second half of the year as one of the growth leaders in the technology sector, we are changing our prior guidance of 35% to 50% annual revenue growth to a new range of 25% to 35% to reflect the weakness in the economy," said CEO Gary Bloom in a statement. The company said that would translate into second-half revenue of $780 million, with the fourth quarter expected to be stronger than the third.

On the company's conference call with analysts, CFO Ken Lonchar roped in earnings projections as well, putting full year EPS at 73 to 74 cents. That's well short of the 84 cents analysts were expecting, according to Multex.

Miffed analysts repeatedly asked about the guidance cuts, especially since Veritas re-affirmed its previous guidance -- which included the 35% to 50% annual revenue growth for the remainder of 2001 -- just 12 days ago.

That's when data-storage hardware maker

EMC

(EMC)

warned that its earnings and revenue would fall

far short of consensus estimates. Veritas' own stock traded off heavily on EMC's news, as investors figured what was bad for data-storage hardware must be bad for data-storage software, an issue the company

hinted at on its last conference call. But then-CEO Bloom said his firm would still make the cut.

In an interview, Bloom said the company wanted to re-assure investors that it would make its second quarter numbers -- which, give or take a million in revenue, it did -- in the wake of EMC's news. But, citing the company's quiet period before earnings are released, he said he couldn't give new projections for the rest of the year at that point.

"What we did was re-iterate the guidance we gave previously from our Q1 conference call" or the 35% to 50% annual revenue growth, Bloom said. With its second quarter revenue 42% higher than last year, Bloom's company made good on that promise. But after looking at the tech wreck exploding around him in July, Bloom said it was only prudent for the firm to bring the numbers in.

"You start looking at what other people are doing, and you start evaluating an incredible miss by EMC and listening to their comments and looking at their peer group," Bloom said. "With everyone else as bearish as they are on their future, we felt our guidance was a little optimistic given our peer companies."

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In other words, things have gotten worse as far as Veritas is concerned, not better.

"It's sort of like a seesaw. You put enough weight on one end, and it tips," says Drew Brosseau an analyst at

SG Cowen

who rates Veritas a strong buy. "They obviously got enough incremental data points since then to back off their guidance." (His firm underwrote Veritas' IPO in 1993)

Of course, Veritas had already ratcheted down guidance on its first-quarter conference call in April. Prior to that call, the company had been expecting revenue growth of 45% to 50% and earnings of 21 cents per share for the second quarter.

Veritas shares closed higher in regular trading, up $3.26, or 6.9% to $50.42, before it released the results. In after hours, shares traded back down to $45.70, a drop of 9%, according to

Instinet

. With its new guidance, shares still trade at more than 62 times 2001 earnings, and they're below where they closed before reporting results one quarter ago, when they ended at $57.58.

Dane Lewis, an analyst at

Robertson Stephens

who has a market perform rating on the stock, says the business environment is simply worse than many people expected back in April or May.

"Look, things are really tough out there. Q3 is a disaster, there's no way around it," Lewis says. "The market is soft, stuff is not closing and Europe is going to suck." Economic generalities aside, he thinks Veritas is a healthy company, one that will make it through the economic downturn stronger than it was before. (His firm hasn't done underwriting for Veritas.)

In that light, investors might want to think about how tough things have gotten in general if they're getting hard for Veritas. On its conference call, the company said its average deal size was just $130,000. In the world of enterprise software, that's the equivalent to a 15-cent cup of coffee -- many software firms have an average selling price of $1 million or more.

During the first quarter, Veritas said it was that

relatively low selling price that was helping it weather the economic storm. If it's getting harder now for Veritas to close its six-figure deals, you've got to wonder how the $1 million-and-above club is faring.

"I'm not covering some of these big boys who are closing the million dollar deals, but I think you're right: there's going to be more of that foot-dragging and an extended approval process that goes up with the price per deals," Lewis says. "There's no hiding from this."

Brosseau, however, noted that Veritas does close million-dollar deals, ones that make or break its quarters. So he doesn't think Veritas' average deal size is all that meaningful for other companies. "I don't think you can make that assessment," he says.

Veritas' Bloom, however, was clear in his outlook: while he thinks his company is gaining market share and becoming stronger against its competitors, business has diminished significantly from the heyday of the Internet boom.

"Clearly, if we're reducing our guidance, that's an indication that the business environment we're operating in is weakening out from under us," Bloom said.

So much for a recovery in the second half.