Security Vendor McAfee Sees Profits Surpass Street Projections

McAfee reported a solid quarter, surpassing Wall Street forecasts. McAfee officials said they will still look to cut costs in the wake of last year's purchase of Secure Computing, the company's biggest-ever acquisition at $465 million.

Security software maker McAfee Inc. reported slightly higher-than-expected quarterly profit and forecast revenue for the current quarter above Wall Street's expectations, as viruses and malicious programs increasingly flood the market.

Sales of security software -- applications that guard computers and servers against bad software and viruses -- were holding up well in the economic downturn, as a proliferation of dangerous applications tempered expectations for reductions in corporate spending, executives said.

The company forecast earnings, excluding special items, for the March quarter of 46 cents to 50 cents a share on revenue of $440 to $460 million. Analysts had been estimating a profit of 49 cents a share on revenue of $426 million.

McAfee's shares climbed almost 3 percent after hours.

"It was one of the better quarters we've seen," said Pacific Crest analyst Rob Owens. "They continue to take share in the marketplace."

McAfee said it will continue to cut costs and find efficiencies in the wake of last year's purchase of Secure Computing, the company's biggest-ever acquisition at $465 million.

But it currently expects its net headcount to remain flat through 2009.

The No. 2 maker of security software said it has imposed a hiring freeze, instituted mandatory time-off, frozen salaries, and is consolidating facilities.

Chief Executive David DeWalt said McAfee was on the hunt for small- to mid-sized acquisitions.

"For seven consecutive quarters we've taken market share and I'm convinced we can continue to do so," DeWalt said on a conference call with analysts.

DeWalt told Reuters in an interview that even with the economy faltering and the company's customers cutting costs, the need for security software was pressing.

"Security has risen to the top of IT companies' priority list," he said, noting that the company saw more malware in the past year than it had in the previous 5 years combined.

McAfee said net profit in the fourth quarter ended December 31 rose to $45.4 million, or 29 cents a share, from $12.2 million, or 7 cents a share, in the same period last year.

Excluding certain items, the company posted a per-share profit of 53 cents, ahead of a 52 cent average analyst forecast, according to Reuters Estimates.

But revenue rose 19 percent to $424 million, below Wall Street's estimate of $435.6 million.

Shares of McAfee and those of chief rival Symantec Corp have held up relatively well in the downturn. McAfee's stock has fallen around 12 percent from a year ago, while Symantec's shares are off around 16 percent.

But competition looms. Microsoft Corp recently announced it is discontinuing sales of its subscription PC security service and will launch a free product that focuses on anti-virus protection.

"We don't see a whole lot of impact that Microsoft has," DeWalt said. "Over three years in trying to sell in the consumer security market... they frankly gave up on it a bit."

Shares of Santa Clara, California-based McAfee closed at $30.17 on the New York Stock Exchange and rose to $31.02 in extended trading.