Websense shares sink following 1Q results

Shares of Websense Inc. slid on Friday after the company posted first-quarter results which topped Street expectations, but an analyst said slower billings growth and market saturation could hurt its prospects.

For the quarter ended March 31, the Web, messaging and data-protection technology company reported a loss of $6.2 million, or 14 cents per share, compared with a profit of $3.9 million, or 9 cents per share, a year ago. Stripping out one-time items, the company earned $16.1 million, or 35 cents per share.

That beat Wall Street's average projection of a per-share profit of 30 cents, according to a poll by Thomson Financial.

Revenue grew 35 percent to $67 million from $49.7 million, in the year-ago period. Adjusted revenue, which included about $20 million in subscription revenue from past billings to SurfControl customers, totaled $86.5 million _ in line with the company's guidance, and ahead of the Street's target of $84.8 million.

Websense acquired British Internet security company SurfControl PLC in 2007 for $400 million.

The company also maintained guidance of 2008 earnings of $1.15 to $1.25 per share, with pro-forma revenue of $325 million to $335 million. Wall Street projects a full-year profit of $1.23 per share, with sales of $334.6 million.

Wachovia Capital Markets analyst Philip Rueppel called the results strong, but warned that Websense's quarterly billings of $67.5 million while in-line with expectations, were down 10 percent year-over-year.

The analyst, who holds a "Market Perform" rating on the stock, also said possible saturation in the domestic large company market and its successful integration of SurfControl remain risks.

Likewise, Friedman, Billings, Ramsey analyst Daniel Ives pointed to the soft billings number but said the company making "steady progress" on both its organic and SurfControl initiatives. However, the analyst warned that "near-term integration headaches and macro headwinds could limit upside."

Websense shares dropped $1.30, or 6.4 percent, to $19 in afternoon trading. The stock has ranged between $15.43 and $24.31 over the past 52 weeks, and is up 19 percent since the start of the year.