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Veritas beats estimates
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October 12, 2000: 5:44 p.m. ET
Data storage software maker notches 73% revenue gain, 81% earnings jump
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NEW YORK (CNNfn) - Veritas Software, the leading independent maker of data-storage software used in corporate networks, reported third-quarter earnings that beat analyst expectations, as demand for its products soared.
Mountain View, Calif.-based Veritas reported after the close Thursday that its third-quarter pro forma net income, which excludes purchase accounting adjustments, increased to $70.3 million, or 16 cents per share, from $38.9 million, or 9 cents per share, in the same period last year. The mean analyst estimate was 14 cents per share, according to earnings estimate tracker First Call.
Revenue rose 73 percent to $317.2 million from $183.4 million.
"We continue to see strong product demand across all channels and geographies for all of our data availability product lines including data protection, file and volume management, clustering and replication," said Mark Leslie, chairman and CEO, in a statement. "As a result, Veritas Software is now operating at an annualized revenue run-rate in excess of $1.2 billion and has generated over $1 billion in revenue in the trailing four quarters."
The company's revenue was well above the $294.7 million that Lehman Brothers analyst Neil Herman had forecast.
"We continue to believe that Veritas has all its ducks in a row to enjoy 50-55 percent topline annual growth in 2001," Herman said in a research note issued Thursday.
Exploding demand for storage management
Veritas' products help companies protect their data and ensure that it can be accessed at all times. They provide protection against data loss and file corruption, allow rapid recovery after disk or computer system failure, and enable IT managers and end users to work with large numbers of files.
The Internet has created an exploding need for data storage, helping drive Veritas' (VRTS: Research, Estimates) stock price to $138 at Wednesday's close from around $32 a year ago and giving the company a $55 billion market cap. The company's revenue rose from $121 million in 1997 to $596 million in 1999, and is on track to exceed $1 billion this year.
"Our third quarter results were exceptional by all financial measures," said Ken Lonchar, senior vice president and CFO, in a statement. "Along with the continued strength in our international regions, this quarter has been marked by the expansion of our UNIX business as well as steady revenue and market share growth in the Windows NT space."
"Moving into next quarter, we are continuing to see a sound ramp-up in our Hewlett-Packard business and the rising adoption of storage area network (SAN) technology," Lonchar added.
The stock closed Thursday down $16.44 at $121.62, a 12 percent loss, amid a broad-based sell-off of tech stocks. However, it rose $7.38 to $129 in after-hours trading on Instinet.
Veritas' rapid growth rate has driven the stock to a very high price-earnings multiple. The stock now sells for about 240 times what analysts expect it to earn this year and 174 times what Lehman Brothers forecasts it will earn in 2001. Both multiples are high by traditional standards and could make the stock vulnerable to even small pieces of negative news. 
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