Check Point Software warns on profits

Internet security company blames slowing market and lack of growth catalyst.

By SHARON WROBEL
April 5, 2006 08:00
2 minute read.
checkpoint logo 88

checkpoint logo 88. (photo credit: )

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user uxperience almost completely free of ads
  • Access to our Premium Section and our monthly magazine to learn Hebrew, Ivrit
  • Content from the award-winning Jerusalem Repor
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

Checkpoint Software Technologies Ltd. disappointed investors Tuesday, lowering its outlook for the first quarter citing a lack of traction in new products and fierce competition. Shares of the Internet security software provider fell as much as 8.5 percent in early New York trading after the company cut its earnings estimate for the period to 25 to 26 cents per share, or 30 to 31 cents a share excluding one-time and non-operating items. At the beginning of the year, Check Point had forecast adjusted earnings of 32 to 34 cents per share. The average estimate of analysts was for earnings of 33 cents per share for the quarter. "We believe that our first quarter results were impacted by three main factors: The change in our decision to acquire Sourcefire; a shift in product mix toward increased longer term engagements such as software subscriptions and SmartDefense and decreased product revenues; and a slower growth pace in our industry," said Checkpoint CEO Gil Shwed. The company also sliced its revenue forecast. "The pre-announced Q1 revenues at $133 million to 134m. are clearly disappointing in light of our revenue forecast of $149m. and previous guidance at between $145m. and $155m.," said CIBC World Markets, which downgraded the stock to "sector performer" from "sector outperformer." As expected by analysts following the failure of the company's planned deal with Sourcefire last month, Check Point cut its full-year revenue guidance, but to a lower-than-expected range of between $580m. and $610m. from $661m., previously. In a conference call with analysts, Check Point said product revenue was down 15 percent year-on-year at $56m. and identified Japan as the weakest region. The rest of Asia, it said, was strong and the US was okay. "The lowered fiscal 2006 guidance, while expected, was lower than even what most pessimists may have predicted," CIBC said in its note to clients. The firm cut its revenue forecast for the year to the low end of Check Point's range and said it now expects $580.8m. rather than its previously forecast $638.9m. Goldman Sachs noted that the magnitude of the revenue shortfall underscored Check Point's troubled core business. "Although Q1 was impacted by the Sourcefire failure, there are longer-term concerns regarding Check Point's competitive positioning and the lack of innovation and near-time catalysts." Goldman added that Check Point was also poised to lose market share to its closest competitors - Cisco Systems and Juniper Networks - as customers move to appliance-based security. Analysts at J.P. Morgan said that of the $14m. revenue miss for the quarter, about $3m. to $7m. could be attributed to the cancellation of the Sourcefire deal; another couple million to the customer shift towards subscription contracts; and the remaining $5m. to the general market slowdown. "With growth slowing and numbers coming down, there is nothing to point to that can drive share performance," J.P. Morgan analysts said in a concluding note.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS