Check Point Software Technologies Inc (CHKP)

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Merrill Lynch sees Check Point meeting or beating first quarter forecasts
06.4.2005 / 16:31
Shirley Yom Tov

The first quarter of 2005 ended a week ago and on April 18, Check Point Software Technologies (NASDAQ:CHKP) will be opening the financial statements season among the Israeli companies listed on Wall Street. Merrill Lynch today released its projections for the data security company, predicting that Check Point will meet or beat its forecasts.

Merrill Lynch is predicting $139 million revenue and a pro forma profit of $71.2 million or 28 cents per share for Check Point, which is the Wall Street consensus. Check Point itself guided investors to expect revenues in the range of $137-140 million, and a pro forma profit of 29 cents per share.

Turnover of $139 million would be 3% down from the fourth quarter of 2004, which is a seasonally strong one as enterprises spend ahead of the year's end. Against the parallel quarter, Check Point would be making 20% more.

Merrill Lynch expects Check Point's product sales to drop 5-10% based on surveys of distributors, the investment bank explains, but believes demand for Check Point's core products, VPN (virtual private network) and firewalls, remained steady.

The investment bank notes a range of opinions about the Israeli company's competitive status vis a vis Netscreen, which is an aggressive rival over the biggest deals. Check Point does proffer advantages in certain areas, the analyst adds.

Check Point has a healthy backlog of orders for its new products, and is exposed to bigger deals for systems to protect end points, namely against hacker attacks from the outside, says the analyst.

The consensus forecast for the current second quarter is $144 million revenue and earnings of 30 cents per share, but Merrill Lynch is aiming a bit higher: $145 million sales, but sees lower earnings of 29 cents per share.

Check Point is trading at a market capitalization of $5.4 billion, after its stock dropped 11% this year. Tech in general has been in the doghouse, but Merrill Lynch believes investors are hesitantly eyeing software again.

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