Check Point Software Technologies Inc (CHKP)

[midastouch017]

CIBC raises 2006 sales forecast for Check Point
30.10.2005 | 12:18
TheMarker

The results Check Point Software Technologies (NASDAQ:CHKP) released for the third quarter of 2005 were "somewhat disappointing", CIBC World Markets analysts Shaul Eyal and Yair Reiner wrote in an update of the data security company. That letdown was offset however by the company's upbeat guidance for the last quarter, alongside impressive profitability and cash flow.

Check Point's entry into IDP (intrusion detection and prevention) through the acquisition of SourceFire is an excellent driver for long-term growth, they rule.

Repeating an investment rating of Sector Outperformer for the stock, the analysts raised their forecasts for 2006 by a cool $28 million due to that acquisition. Altogether they now foresee $692.8 million revenues for the quarter, but they did not change their earnings per share projection, as they do not expect the acquisition of SourceFire to be earnings accretive next year.

For the third quarter of 2005 Check Point reported $141.1 million sales and earnings of 32 cents per share. Licensing income sank 3% to $65 million, but subscriptions continued to increase. Income from new products comprised 30% of sales in the third quarter, unchanged from the previous quarter.

Merrill Lynch said that lackluster license income growth marred the third-quarter report, after that 3% year to year drop, and 8% slide from the second quarter. Also, deferred revenues declined, the investment bank wrote.

It had praise for the SourceFire deal, but added, "Though operating margins and cash flow were strong and the company repurchased 2.6 million shares, lack of growth in products is likely to weigh on the stock in the near term."

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