SonicWALL Tops Consensus – Analyst Blog

SonicWALL Inc. (SNWL) recently reported fourth quarter earnings of $5.0 million, compared to $3.5 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 10 cents, which topped the Zacks Consensus Estimate of 7 cents per share. The company now has topped the Zacks Consensus Estimate in 3 of last 4 quarters with an average positive surprise of 27.4% or 2 cents.

 

SonicWALL designs, develops, manufactures and sells Internet security infrastructure products designed to provide secure Internet access to broadband customers and process secure transactions for enterprises and service providers. The company also offers security services including content filtering services and anti-virus protection on an annual subscription basis.

 

Net sales for the quarter declined marginally by 0.2% to $54.1 million from $54.3 million in the year-ago quarter. The decline was primarily caused by a 2.7% reduction in License and Service revenues to $31.5 million from $32.4 million in the year earlier quarter. However, the decrease in overall revenues was partially offset by a 3.5% growth in product revenues to $22.6 million.

 

During the quarter, SonicWALL’s gross margin decreased by 60 basis points (bps) year-over-year to 69.1%. Total operating expenses, as a percentage of revenues, reduced by 70 bps to 60.1% primarily due to a 1.0% decrease in research and development expense coupled with a 2.1% reduction in sales and marketing expense. Accordingly, the company recorded a 0.8% growth in operating income to $4.9 million, while operating margin increased 10 bps to 9.0%.

 

At the end of the quarter, SonicWALL had cash and cash equivalents of $39.1 million, compared to $45.1 million in the year-ago period. During the quarter, the company received $7.8 million from tax benefits related to share-based compensation and deployed $1.3 million towards capital expenditure.

 

Moving forward, SonicWALL expects revenues during the first quarter of 2010 to range between $52 million and $54 million, while adjusted earnings per share are expected between 9 cents and 10 cents. The guidance is higher than the Zacks Consensus Estimate of 6 cents per share, which has remained constant over the past 3 months. The Zacks Consensus Estimate for full fiscal 2010, derived from 5 covering analysts, is currently pegged at 28 cents per share, which has remained unchanged as well over the past 3 months.