The software giant posted double digit income and revenue growth, despite a 13% fall in US license sales year-on-year, and flat backup software sales resulting from customer anticipation of a major product launch this month.
For its fourth quarter ended December 31, 2004 Veritas reported GAAP net income of $129 million, down from $191 million in the previous year, when the company enjoyed a $95 million tax windfall. Revenue in the latest quarter was $574 million, up 14% year-on-year.
For the full year 2004, Veritas reported GAAP net income of $411 million, up 18% year-on-year, on revenue of $2.0 billion, up 17% year-on-year.
A 27% year-on-year growth in services revenue was driven largely by renewal of maintenance contracts, the storage software giant said. Speaking after the earnings call, Veritas CEO Gary Bloom said the company does not expect to be able to keep up maintenance growth forever.
It has been coming down, and the untapped market is being covered. But it puts in a strong position for license upgrades, he said.
License sales in Veritas’ categorization of data protection products were flat year-on-year effectively down, given the recent acquisition of KVS Ltd, and currency effects.
We’ve seen volatility in every segment of our business quarter-on-quarter. One thing we believed contributed was that customers were waiting for the new version of NetBackup [launched this month], Bloom said. Veritas does not break out NetBackup sales, but Bloom said: It’s about half of our data protection sales. We’re not talking about a small business, it’s probably $300 million to $400 million.
Defending the company’s overall backup sales, Bloom added: Most analysts saw 5% growth for the backup market in 2004. We got 6% growth. The biggest change in the backup market over the last eighteen months was EMC’s acquisition of backup software supplier Legato in 2003.
Although EMC-Legato scored 19% year-on-year growth in the fourth quarter, Veritas reminder listeners to its earnings call that Legato still owns less than around 10% of the backup market, while Veritas owns around 40%.
The year-on-year decline in US license sales were the result of low spending by telcos and US government departments, and was offset in part by stronger sales elsewhere in the US, and overseas. One reason for the US decline was that some federal departments simply don’t know how much they have to spend, because of the war in Iraq. They’re saying that they don’t know what their budgets will be, Bloom said.
Last month, Veritas proposed a merger with security software maker Symantec Corp, a plan which has not received unanimous support on Wall Street. The topic raised its head during the earnings call, when Bloom referred to large deals signed by customers after they had heard rumors of the merger plan, or later its official announcement.
The best indication of the strength of support was the quantity of business we closed. It was a very back-end loaded quarter, and the customers came through, he said.
For the first quarter of this year Veritas said it expects GAAP net income of $0.18 to $0.20 per share, and revenue of $525 million to $540 million, around 10% year-on-year growth. Veritas hopes to close its proposed merger with Symantec this summer, so its full year guidance of 12% revenue growth was hypothetical only.
