Updated from Oct. 26
, which disappointed investors three months ago, beat third-quarter earnings estimates Tuesday on an 11% revenue jump and said fourth-quarter sales could exceed expectations.
The stock was up $1.15, or 5.3%, to $22.68 on Instinet Wednesday.
Mountain View, Calif.-based Veritas earned $96.2 million, or 22 cents a share, in the third quarter. That was up from net income of $68.1 million, or 15 cents a share, in the same period a year earlier.
Excluding charges, the storage software maker earned pro forma net income of $97.6 million, or 22 cents a share, in the third quarter, compared with pro forma net income of $83 million, or 19 cents a share, a year earlier. Revenue rose 11% to $496.7 million from $446.6 million a year earlier.
Wall Street analysts expected Veritas to earn pro forma net income of 21 cents a share on $488.3 million in revenue in the third quarter, according to Thomson First Call.
Veritas expects fourth-quarter revenue to range from $530 million and $550 million, including revenue from its recent KVS acquisition, and fourth-quarter earnings to range from 22 cents to 24 cents a share on a GAAP basis and range from 24 cents to 26 cents a share excluding charges. Analysts were expecting revenue of $533.3 million, GAAP earnings of 22 cents a share and non-GAAP earnings of 24 cents a share in the fourth quarter.
"We remain confident that we will achieve the goal we set a year ago to drive our business to $2 billion in revenue in 2004," CEO Gary Bloom said in a statement. That represents 14% annual growth, Bloom noted in a postclose conference call.
However, SG Cowen analyst Drew Brosseau noted in a question-and-answer period that excluding sales from KVS and services revenue, the company's fourth-quarter forecast actually calls for user license fees -- a measure of new business -- to come in flat to down from a year ago, when the company posted $310.7 million in user license fees.
"Until we see some level of improvement in IT spending and our segment ... I frankly don't think we'll see a big increase in growth," CFO Ed Gillis responded. Along the same lines, Bloom noted continuing IT spending challenges at least twice on the call.
After the call, Brosseau said Gillis gave "an honest response to the reality that they're not growing."
"It's not particularly encouraging," added Brosseau, who attributed the lack of growth to weakness in the U.S., increased competition and increased pricing pressure. (Cowen doesn't have ratings on stocks but is not recommending investing in Veritas; the firm has done banking with Veritas.)
In a telephone interview after the call, however, Bloom seized the opportunity to rebut Brosseau's charge about growth. He noted that the company's fourth-quarter user license fee guidance comes to roughly $304 to $326 million, when backing out KVS and service revenue from the overall guidance. The midpoint of that range, $315 million, would translate into license revenue growth -- albeit a modest 1.4% year over year.
Bloom suggested looking at his company's sales trend over a longer period of time -- the four years from 2000 to 2004, which he characterized as the most difficult IT spending environment ever seen. During that period, Veritas expects to grow revenue by $800 million from $1.2 billion in 2000 to $2 billion this year.
"We're confident in our business," Bloom said. "It continues to be ... participating in a measured recovery in IT spending."
In the third quarter, user license fees increased by 2% to $287.4 million from $281.8 million a year earlier and climbed and 6.7% sequentially from $269.4 million in the second quarter. Deferred revenue -- for Veritas a reflection of software renewals -- dropped to $418.2 million on Sept. 30 from $422.6 million on June 30.
Shares of Veritas still haven't fully recovered from a whopping 36% slide to $17 in a single day in July, when the company was one of the first of many software names to warn of weak second-quarter results.
But Bloom closed Tuesday's conference call saying he was "happy about the
third-quarter results and the change in the trend from the second quarter."