07:36 PM

Symantec 1Q Profit Drops, But Revenue Jumps

The company's enterprise messaging products experienced the largest sales growth during the quarter, with IT policy compliance and managed security services also posting strong gains.

Symantec reported a 52 percent drop in profit during its first quarter due to rising operating expenses, but reported strong revenue growth that exceeded Wall Street's expectations.

During its fiscal first quarter which ended June 30, Symantec reported income of $95 million, down from $199 million during the same quarter last year. Earnings per share during the same period fell from 27 cents per share to nine cents per share.

Cupertino, Calif.-based Symantec's operating expenses rose from $350.8 million last year to $824.1 million during the recent quarter.

However, Symantec racked up $1.26 billion in revenue during the first quarter, a jump from $699 million last year. Thomson First Call's average analyst estimate was for Symantec to report earnings of 21 cents per share on $1.24 billion in revenue, and the results also surpassed an estimate Symantec issued in May.

In terms of total revenue during the recent quarter, Symantec said its security and data management business represented 38 percent, its data center management business represented 27 percent, and its consumer business represented 30 percent.

Services - an area from which Symantec intends to generate $1 billion in revenue by 2010 - represented five percent of Q1 revenue.

"Services are an important part of our solutions strategy," Symantec Chairman and CEO Thompson told investors Wednesday in a conference call.

Symantec's enterprise messaging products experienced the largest sales growth, with IT policy compliance and managed security services also posting strong growth, said Thompson.

Symantec will focus in the coming year on making its channel partner ecosystem more efficient and expanding its solutions portfolio, Thompson said, adding that Symantec has seen a "dramatic increase" in the amount of availability products sold through the channel since the Veritas acquisition.

Symantec plans to also strengthen sales, support, and channel program resources for its Platinum partners, Thompson added.

For the September 2006 quarter, Symantec expects revenue of between $1.265 billion and $1.295 billion, and earnings per share of between 11 and 12 cents. For the entire fiscal year ending next March, the vendor expects revenue of between $5.1 and $5.3 billion, with earnings per share ranging from $0.46 and $0.56.

Merrill Lynch on Tuesday downgraded Symantec to neutral from buy due to concerns over flagging security spending. However, investors greeted the earnings announcement by sending shares of Symantec, which closed Wednesday trading up $0.36 at $15.80, up $0.97 to $16.77 in after hours trading.

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