Check Point buys Sourcefire for $225m.

Shares tumble 9% as Check Point tightens Q3 revenue forecast.

By SHARON WROBEL
October 8, 2005 17:46
3 minute read.
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Check Point Software, a developer of Internet security products, on Thursday announced the acquisition of privately held Sourcefire Inc. for $225 million, after lowering its revenue outlook for the third quarter. "We expect this acquisition to contribute 6 percent to 8% to our revenues in 2006. Earnings per share will be 1 to 2 cents lower," Check Point CFO Eyal Desheh told The Jerusalem Post. Check Point said that the directors of both companies and Sourcefire shareholders have signed a definitive agreement and have approved the deal. The deal is expected to close in the first quarter of next year after receiving regulatory approvals. Under the terms of the agreement, the transaction will involve cash and the assumption of Sourcefire's stock-option plan. Columbia, Maryland-based Sourcefire develops security software designed to monitor network access. The company was founded in 2001, and has offices in the US, Britain, Germany and Japan. "We believe Sourcefire has world-class solutions for internal security through their Intrusion Sensor, Real-time Network Awareness and Defense Center product lines. These align perfectly with Check Point's vision for internal security and are ideal complements to our InterSpect and Integrity solutions," said Check Point chairman and CEO Gil Shwed. "Both companies share a deep commitment to customers, and this acquisition will enable us to deliver the industry's most comprehensive end-to-end Internet security to all types of customers from consumers to the largest enterprises." Check Point added that the acquisition would give the company access to Sourcefire's140 employees and strengthen its relationship with Sourcefire enterprise customers and the Snort community with tens of thousand of users worldwide. Shares of Check Point fell more than 9% to $21.47 on Thursday as the company said that third-quarter revenue would be in the lower end of its previous forecast. Check Point announced the release of financial results for the third quarter to be on October 28. Total revenue for the third quarter is expected to be in the range of $140m. to $141.5m. at the very low end of the company's July guidance of $140m.-$150m. Analysts' expectations were slightly above the midpoint of the company's earlier forecast, at about $147m. "The third quarter results are within guidance. We have tightened our guidance as some business over the summer months has been pushed over to the fourth quarter. Our guidance for the full year remains valid," said Desheh. Earnings per share for the third quarter, excluding acquisition-related charges, is expected to be in the range of $0.31 to $0.32 compared with the previous forecast of $0.30-$0.33. Analysts on average had forecast $0.32. In July, Check Point said the company will generate $585m.-$600m. in revenues for 2005, and earnings per share of $1.23-$1.28, upgraded from previous guidance of $1.18-$1.24.

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