Veritas Software Corp. on Tuesday warned quarterly estimates would miss Wall Street estimates due to sluggish U.S. demand for data storage products, sending its stock down more than 35 percent.
The news, which sent shares to a 15-month low, follows similar warnings last week by other software companies such as Sybase Inc. and WebMethods Inc.. Other software stocks also fell on Monday, as analysts say the 20-percent estimate miss at Veritas indicates the technology spending recovery is much slower than they have anticipated.
Veritas, based in Mountain View, California, said it expects to post a second-quarter net profit of 17 cents to 19 cents a share. It estimates profit, excluding items of 18 cents to 20 cents a share, lower than the average analysts’ estimate of 24 cents a share, as compiled by Reuters Estimates.
“The technology budgets’ recovery will be a lot slower than Wall Street originally expected,” said Amy Feng, an analyst at JMP Securities. She added that expectations have been set too high following a strong first quarter, in which there was a record-low number of earnings warnings.
A Veritas spokesman declined to comment further, but analysts say Veritas might be suffering from slow demand for data backup software, an area in which it specializes.
The shortfall may also have something to do with increasing competition from Legato Systems, which was recently acquired by hardware maker EMC Corp., said Kaushik Roy, an analyst with Susquehanna Financial Group.
“It’s not a storage in general issue, it’s more company specific,” Roy said. “Their (Veritas’) products are not as competitive, it would only hurt them more in the second half of the year.”
Veritas said software license sales slowed during the last month of the quarter, when most software deals are traditionally signed. But demand for products and services in most of Europe and Asia Pacific met its expectations.
“Part of what you are seeing is when a company is exposed to large deals, and when those deals slip, you’ve got problems,” Sanford Bernstein analyst Charlie Di Bona said.
The company now projects revenue of $475 million to $485 million, including license revenue of $263 million to $273 million and services revenue of $212 million.
Analysts on average have expected revenue of $502 million. There is no official estimate for software license sales, but several analysts said they have pinned their numbers at $308 million.
“The magnitude of the earnings miss is pretty large,” said Steve Berg, an analyst with Punk Ziegel & Co. “In the past, Veritas has done a good job hitting its numbers.”
The miss at Veritas was blamed for other software stocks sliding lower. BEA Systems Inc. fell 5 percent to the lowest level in more than a year, Siebel Systems Inc. was down 9 percent and BMC Software slipped 4 percent.
Veritas Software Corp. Tuesday reported preliminary quarterly results that missed Wall Street estimates, citing sluggish U.S. sales of business software, and its shares plunged 20 percent.
The company said it expects to post a second-quarter net profit of 17 cents to 19 cents a share, and a profit of 18 cents to 20 cents a share, excluding amortization costs and stock-based compensation.
The average Wall Street estimate was 24 cents a share, with a range of 22 cents to 25 cents, as compiled by Reuters Estimates.
Veritas said revenue is expected to be $475 million to $485 million, including license revenue of $263 million to $273 million and services revenue of $212 million. Analysts on average have expected revenue of $502 million.
The warning by Veritas, based in Mountain View, California, follows similar warnings by other software companies, such as Sybase Inc. and WebMethods Inc.
Veritas said software license sales slowed at the end of the June quarter, while demand for products and services in most of Europe and Asia Pacific met its expectations
