Check Point Software Technologies Tuesday blamed a weak worldwide economy for first-quarter financial results that were down across the board from a year ago.
"Customers were not anxious to commit large portions of their budget at the beginning of 2002," said Jerry Ungerman, president of Check Point, in Redwood City, California. This reluctance to spend translated into "softness in all markets we serve around the world," he said.
For the quarter ended March 31, Check Point said it tallied consolidated revenue of US$104.6 million, down from $145.0 million in the same quarter of 2001 and below the consensus analyst estimate of $106 million, according to Thomson Financial/First Call.
The company brought in $63.5 million in net income, or diluted earnings per share of $0.25, for the first quarter, down from $83.6 million, or diluted earnings per share of $0.32, in the same quarter of fiscal 2001. The earnings figure for the quarter just ended was a penny higher than analysts had expected, Thomson Financial said. However, analysts had lowered their estimates at the start of the month after poor sales prompted Check Point to reduce its own expectations.
In addition to weak enterprise spending, the results were hurt by fewer large orders coming in for the quarter, said Eyal Desheh, Check Point's chief financial officer. In the fourth quarter of 2001, orders totalling more than $10,000 comprised 57 percent of Check Point's business, while they made up only 52 percent of orders in the first quarter of 2002, he said. Companies are currently splitting up what would once have been large orders over multiple quarters, he said.
Still, Gil Shwed, Check Point's chairman and chief executive officer, portrayed the future as bright. The company is having "huge success" with the low-end appliance offerings from its subsidiary SofaWare Technologies Ltd, he said. Its S-box appliance shipped 3,600 units for the quarter, he said [See "Check Point: amazing demand for security appliance," March 29].
Other promising areas include the very low and very high ends of the market, where growth appears to be faster than growth overall, Ungerman said.
Shwed offered positive guidance for the balance of the year. Earnings for the second fiscal quarter are expected to come in at $0.26 per share, he said, a penny higher than analysts had been expecting, according to Thomson Financial. Third-quarter earnings are expected to be $0.27 or $0.28 per share, which also compares favorably with analyst estimates.
The company spent $7.3 million on research and development during the quarter, down from $9.3 million in the first three months of fiscal 2001.
Tuesday's numbers were in line with the guidance that Check Point gave on April 4, when it said it would post revenue between $104 million and $105 million for the quarter. The company said at that time that it expected $0.24 per share to $0.25 per share in earnings. Those numbers were downward revisions, which Shwed blamed at the time on weak sales due to the economy.
Before that guidance was issued, analysts had been expecting earnings per share of $0.29. [See "Check Point expects to miss Q1 forecast by $15M," April 4].
Check Point shares (CHKP) on the Nasdaq ended the day down 2.3 percent, at $18.20.