When Veritas (Nasdaq: VRTS ) announced yesterday that it had met its earnings expectations, Wall Street reacted with little more than a shrug of indifference. In dropping the software company a point and a half after the bell, the Street seemed to be saying, "Who cares? Symantec is buying you guys out anyway."
Indeed, ever since the news broke that Symantec (Nasdaq: SYMC ) would buy Veritas, the two companies' stocks have moved in tandem -- with Symantec setting the pace and choosing the direction. And that's completely logical, given that Symantec will be paying for Veritas with its own stock.
Yet even though the Street has little reason to be interested in Veritas' news, Symantec's owners probably will be. After all, yesterday's numbers tell the tale of how good a company Symantec has decided to buy. And yesterday's preview of what the future holds for Veritas is also a preview of how that future may affect Symantec after the buyout (expected to close in Q2). So let's take a quick look at Veritas' numbers, for the Symantec shareholders' sakes, if for no other reason.
Regarding the future, Veritas is projecting year-on-year revenue growth of about 11% over the course of 2005 and, in the nearer term, $0.15 to $0.20 per share in profits for Q2.
And as for the past, Veritas grew its revenues at a sprightly clip in Q1. Although revenues were down sequentially, they rose 15% in comparison to the year-ago quarter. Profits didn't fare so well, rising just 5%. But that was primarily the result of costs Veritas incurred in preparation for its impending merger. If you back out the merger-related costs, the company likely would have grown its profits a bit faster than sales, with a 17% growth rate looking probable.
Speaking of the merger, Veritas has done a considerable amount of balance-sheet spring cleaning, perhaps with the aim of smoothing the transition and the merging of two companies' books. Cash and short-term investments are down $150 million, but debt is down, too, with $381 million paid off during the quarter. Accounts receivable and payable have experienced significant reductions. And free cash flow is gushing, up $49 million from the year-ago quarter's $189 million -- through a combination of more cash generated from operations (see the above comment on A/R declining) and less cash spent on capital expenses.
In sum, if or when this merger receives final approval, Veritas will be in fine form for integration into Symantec.
Now for some Foolish reading on the other party to this merger, Symantec:
- Symantec Steps in It
- Internet Wars
- Microsoft's Butterfly Effect
- Microsoft Snipes Sybari
- Symantec Better Than Its Word
Fool contributorRich Smithhas no interest in either of the companies mentioned in this article.