Firewall/VPN vendors saw growth in 2002

Big deals

ComputerWire: IT Industry Intelligence

Check Point Software Technologies Ltd and NetScreen Technologies Inc, rival suppliers of firewall/VPN systems, yesterday both reported pleasing financials for calendar 2002, as demand grows for appliances that protect networks from attack,

Kevin Murphy writes

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Both companies beat analysts’ estimates. NetScreen posted significantly higher revenue on new products and international sales, while Check Point said its revenue was down somewhat due to the weak economy.

Check Point said its net income for the fourth quarter was down 16% at $64.5m ($0.26 per share), on revenue down almost 10% on last year at $110.3m. For the year, the net income was down almost 21% at $255.1m, on revenue down about 19% at $426.9m.

NetScreen said its GAAP net income for its first fiscal quarter to December 31 was $3.2m ($0.4), versus a loss of $34.5m a year earlier, on revenue that was up 76% year-over-year at $51.1m. At the pro forma level, net income was $10.9m versus $227,000.

NetScreen’s CEO Robert Thomas said his company continues to take market share from Check Point. He said: "In the Americas, we saw good growth in our enterprise business as we continue to compete favorably against our much larger competitors."

Check Point’s president Jerry Ungerman told ComputerWire that the differences in how the two companies sell their products should be factored in when comparing growth numbers. Check Point sells software direct and to OEMs, NetScreen sells appliances.

"You need to add the value of the hardware in to see who is growing market share," Ungerman said. He said that Check Point, which saw 50% of its product sales coming from appliance-making OEMs, grew three times as fast sequentially in dollar terms.

Check Point’s revenue from products fell 20% to $65.5m, while subscriptions and upgrades rose 13% to $35.3m. Services revenue was $9.5m, up just slightly from $9m in the year-ago quarter. Half of sales were via OEMs, and up to 95% of OEM sales were made by Nokia Internet Communications Inc.

Ungerman said the number of big-ticket sales made to big companies, a metric that was down in the company’s third quarter, increased again in the fourth quarter. About 20% of deals made in the quarter were worth over $50,000.

"We made a lot of very large deals with very large companies," Ungerman said. "A lot of the large deals were on the high-end appliances." He added that recently signed OEM deals with several big iron vendors will not start bringing in significant revenue until the second or third quarter of next year.

Check Point expects first-quarter revenue of $104m to $106m and earnings per share of $0.24 to $0.25. NetScreen expects second fiscal quarter revenue to be up between 10% and 12% on the first quarter.

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