Computer server room.
Computer server room. Photo by AP
Text size

Israel-based computer-network security firm Check Point Software Technologies beat analysts' estimates for quarterly profit and kept its full-year targets, easing fears that its customers might cut spending on their networks in a faltering global economy.

Check Point said on Wednesday that new products like ThreatCloud, which allows businesses to team up to fight cyber crime, were helping it to gain market share. It also announced plans to buy up to $1 billion of its shares in the next two years. Its shares, hit recently by fears of slowing demand, jumped in early Nasdaq trading and were up more than 8% to $49.33 at 12:55 P.M. New York time. "We take [the] current performance as a sigh of relief given the Street's expectations and some observers' expectations for negative results," said Oppenheimer analyst Shaul Eyal.

He estimated the share buyback could boost earnings per share by 25 to 30 cents over the next two years.

Check Point posted earnings, excluding one-off items, of 77 cents per share in the second quarter, compared with 68 cents a year earlier. Revenue rose 9% to $329 million.

The company had been expected to earn 76 cents a share on revenue of $331 million, according to Thomson Reuters I/B/E/S.

Billings grew 9%, which investors should view positively, said Nomura analyst Rick Sherlund, adding that "given the 29% pullback in the stock since first-quarter earnings, we believe the stock was discounting a worse result."

"We have seen great acceptance of our new security appliances as a platform of choice for security consolidation," Check Point Chairman and CEO Gil Shwed said, noting sales of enterprise appliance units grew more than 20%.

Such appliances, which combine hardware and software, account for over 80% of the company's revenue, Shwed told a news conference. Check Point continues to take market share from competitors such as Cisco Systems and Juniper Networks, Shwed said. In April he estimated Check Point has more than 40% of the enterprise security market.

Shwed said he did not see Palo Alto Networks, a competing designer of Internet firewalls that plans to go public tomorrow, as a major threat to Check Point, the world's biggest pure-play network security company.

Palo Alto coined the term "next generation firewall" to describe its products, which let companies tightly control access to Internet applications for specific users.

"They are still a niche player," Shwed said, arguing that Check Point's application control technology was better.

Though Shwed said he did not see pressure on prices from the competition, customers are buying smaller models that provide improved performance. Shwed said revenue growth had slowed due to economic pressures in Europe, where a weaker euro reduced the purchasing power of Check Point customers. On the other hand, the stronger dollar lowered company expenses by $6 million and Shwed said new markets were boosting growth.

For the third quarter, Shwed forecast revenue of between $316 million and $345 million and earnings per share before one-off items of 74-81 cents. The company is forecast by analysts to earn 79 cents on revenue of $339.9 million. The company maintained its full-year outlook for revenue of $1.345-$1.395 billion and adjusted EPS of $3.10-$3.20