Check Point blames economy for weak sales

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Check Point blames economy for weak sales

Check Point Software Technologies blamed a weak worldwide economy for its first-quarter financial results that were down across the board from last year.

"Customers were not anxious to commit large portions of their budget at the beginning of 2002," said Jerry Ungerman, president of Check Point. This reluctance to spend translated into "softness in all markets we serve around the world", he said.

For the quarter ended 31 March, Check Point said it tallied consolidated revenue of $104.6m (£72.3m) down from $145m in the same quarter of 2001 and below the consensus analyst estimate of $106m, according to Thomson Financial/First Call.

The company brought in $63.5m (£43.9m) in net income, or diluted earnings per share of 25 cents, for the first quarter, down from $83.6m, or diluted earnings per share of 32 cents, 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 (£6,907) comprised 57% of Check Point's business, while they made up only 52% of orders in the first quarter of 2002, he said. Companies have been splitting up what would once have been large orders over multiple quarters, he said.

Gil Shwed, Check Point's chairman and chief executive officer, was more optimistic. The company is having "huge success" with the low-end appliance offerings from its subsidiary, SofaWare Technologies, he said. Its S-box appliance shipped 3,600 units for the quarter, he said.

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 predicted earnings for the second fiscal quarter would come in at 26 cents per share, he said, a penny higher than analysts had been expecting, according to Thomson Financial. Third-quarter earnings are expected to be 27 cents or 28 cents per share, which also compares favourably with analyst estimates.

The company spent $7.3m (£5m) on research and development during the quarter, down from $9.3m in the first three months of fiscal 2001.

However, results were in line with the guidance that Check Point gave on 4 April, when it said it would post revenue between $104m (£72m) and $105m (£73m) for the quarter.

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